10:33 am EDT:  Conflicting signals abound.  After selling off to the previous day’s lows pre-market, the ES has rebounded to the daily R1′s and is selling off again below VWAP.  The leaders have reversed somewhat, with gold and the EuroYen up, and the Dollar down.  We would have thought that this, along with the break above 1100 in the ES, would generate some more follow through for equities to the upside.  It could be that the proximity of the Nasdaq and Dow to their 50 day MA’s has limited buying interest or gotten shorts interested.  CPI and opex tomorrow are also variables.  Bottom line is that the markets should be more in synch by the end of tomorrow, and until then we will tread cautiously.

The Precise Take – Equities continue to consolidate ahead of CPI and opex

Leaders Analysis:  Two of the leaders did not confirm the equities strength yesterday as the US Dollar Index was up materially and the EuroYen stalled at the 20 day moving average.  However, 30 Year T-Bonds did sell off strong.  The EuroYen is down overnight, taking out yesterday’s low and the US Dollar is up, but has retreated from last Friday’s high.  If it sells off from here, equities have a good chance of a major up move.  If the Dollar breaks upward, equities will likely selloff, with any gains coming in fits and starts.  All in all, the leaders are slightly equities bearish.

Medium Term Analysis:  CPI and options expiration are tomorrow, then focus will shift next week to the first revision of Q4 2009 GDP, which likely be to the downside.  It is possible to envision either a retest of the January highs or a retest of the February lows a week from now.  Given the leaders’ stance, our bias is to the downside.  However, as we mentioned yesterday, if the ES is able to break above 1100, there is very little volume resistance up to 1127.  In addition, the 1060 to 1070 area has significant volume support, so it is more likely to hold than the previous attempt to build a base in late January and early February.

Trading Today:  As we write, PPI came in a bit hot and jobless claims disappointed.  The ES has found support for the time being near the overnight low of 1094.00.  The lower end of the projected range is…

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