The Precise Take – Equities to gap up again into resistance.

Leaders Analysis:  Overnight, the US Dollar Index rejected the same resistance area as the previous day and is back in the middle of its trading range.  We probably won’t mention it again until it breaks its range is it has not been predictive lately.  The EuroYen is basing and looks poised to rally.  Though the 30 Year T-Bond yield broke strong trendline resistance last week, it may be a false breakdown because it is up over the trendline again this morning.  All in all, the leaders are slightly equities bullish.

Medium Term Analysis:  What is notable about the level reached overnight in the ES (1122.75) is that it is the 76.4% retracement of the entire down leg, which would make the second such retracement in a row.  The February 5 low was a 76.4% retracement from the October low to the January high.  This pattern, which occurs intraday, is more rare on the daily, but can perform four or five such retracements in a row.  If the ES closes over 1123, the pattern is negated but, if not, 1060 is the next downside target.  Given the strength of yesterday’s rally, we expect follow through by tomorrow.  But amidst all the bullishness, we also feel compelled to…

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