The Precise Take – Equity futures down on consensus GDP

Big Picture Analysis:  Yesterday, the ES sold off early, recovering much of the losses after the 7 Year auction, only to close weakly.  This morning, Q2 GDP came in a hair off consensus (actual 2.4% vs. 2.5% expected), and Q1 was actually revised higher a full percentage point (3.7% final).  The ES has traded down to just below a major 50% retracement (off the July 20 low)–but is respecting it for now.  In general, equities do not like surprises in big reports, whether they are to the upside or downside, and consensus readings–such as today–tend to be the most bullish in an already established uptrend.  Accordingly, to support the bullish case, if there is weakness today, it should be done with in the first hour with a subsequent recovery and close above the open.  The ES could either rally out of the gate or scare additional longs out with a plunge to the…

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The Precise Take – Equity futures recover overnight

Big Picture Analysis:  Economic news has not been good, with the Beige Book being the third straight disappointment yesterday.  However, the resulting afternoon selloff in equities was controlled and respected support, with the ES overnight recovering most of yesterday’s losses.  Today is quiet, while tomorrow faces a slew of reports, beginning with the GDP kahuna at 8:30 am, followed by Chicago PMI and Consumer Sentiment, all before 10:00 am.  Monday, ISM Mfg could be a mover, then traders will start looking ahead to next Friday’s Employment Situation.  Nearly half of earnings have been reported.  The point is that there is much price movement fodder, but if pullbacks remain similar to yesterday, we should continue to see higher highs.

Leaders Analysis:  The 10 Year slid yesterday afternoon to its 20 day moving average and trendline support (that was previously resistance), though the 30 Year did not follow and is net up since Tuesday. The US Dollar Index has found support just above the 50% retracement of its entire up leg, but has not managed much of a bounce.  Correspondingly, the Euro against the Dollar is up to major resistance.  The EuroYen forex cross has bounced off its prior breakout area in each of the last two days.  These levels in the currencies should either be respected or broken convincingly by…

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The Precise Take – Equity futures attempting to maintain on negative Durable Goods

Big Picture Analysis:  Equities held up well yesterday considering the disappointing Consumer Confidence report.  Today, bulls will have to defend against an even more disappointing Durable Goods report that came in negative month over month and materially below expectations–relevant, as some will read into it for clues as to Friday’s preliminary Q2 GDP.  A pullback from the recent surge is rather expected at this point, so for bulls to really assert control, they would simply rally in the face of today’s news.  Otherwise, a mild pullback today to the 1099.25 to 1000.50 support cluster would allow new longs to enter at a favorable risk reward area.  Below there, and the rally is not dead, but simply…

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The Precise Take – Equities strength continues

Big Picture Analysis:  Yesterday, the cash S&P 500 and SPY closed at their 200 day moving averages yesterday, also the 50% retracement, or halfway back, of the entire down leg.  It was on Monday, June 21, that the ES opened at its previous 50% retracement and sold off all day, marking an interim top.  And, it was just prior to the open on Tuesday, July 20, that the ES hit its 50% retracement of the fledgling rally and marked the most recent low.  Accordingly, these levels are to be watched.  Unless and until price suggests otherwise, however, there is not cause for bearish alarm.  The ES could easily correct to the middle of its trend channel, about 1101-03 today, and keep momentum intact.  Only a close below casts doubt on the rally.

Leaders Analysis:  The EuroYen is trading well above its 113.4 resistance, and a close today would be a significant breakout, concurrent with a bullish cross of its 20 day moving average over its 50.  The US Dollar Index broke support overnight and is heading toward the 50% retracement of its long term up leg.  The 10 Year Treasury Yield pushed above trend line resistance that has held since April 5, but closed back below it.  This morning it has gapped back above, and it will be the important market to watch as…

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The Precise Take – Risk preference being confirmed

Big Picture Analysis:  Last week ended very strong, with the equity indexes clearing major resistance levels.  While this is about the time–when things look their most bullish–that the intermediate term correction has reasserted its downward pressure in the last few months, the current rally looks technically more solid from a variety of viewpoints: liquidity, breadth of participation, small cap leadership and, perhaps most importantly, ability to discount disappointing news.  That said, watching the reaction to the scheduled news this week, including earnings announcements, will be all the more important.  New Home Sales, by virtue of being the only release intraday, could be a mover; however, the real tests will be Durable Goods Wednesday and Q2 GDP on Friday.  Inasmuch as things seem to be getting back to normal, it will be interesting to see if the slightly bearish Treasury auction seasonality will reassert on Tuesday and Wednesday from open to 1:00 pm.  A retracement to ~1085-86 today or tomorrow is possible and would not violate the uptrend, but major rallies have a habit of…

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The Precise Take – Signs of risk preference reappearing

Big Picture Analysis:  It has been a volatile week, and that trend is likely to continue today, as the final European bank stress  test results are due to be released just after their close today, at noon EDT.  Yesterday, bulls were able to drive the ES, and comfortably close, in the green value area, below—what we considered a necessary first step prior to and potential bellwether of a breakout of the 1100 level.  If there is a pullback first, the yellow box, also marked below, from 1076 to 1079 should hold as support today or early Monday.  Otherwise, another perceived failure just under the 1100 level may give the bears too much ammunition.

Leaders Analysis:  We were watching primarily long term Treasury yields and the AussieYen.  The 10 Year Yield is up materially, though now at its old long-standing trendline resistance.  The AussieYen has just barely…

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The Precise Take – Yo-yo consolidation continues overnight, in equities

Big Picture Analysis:  Just as the bulls staved off disaster Wednesday, the bears reasserted control yesterday—yet equity futures have recovered to the pre-Bernanke speech levels overnight.  In general, equities are gripped in a tug-of-war, with the breakout of the 1050 to 1100 area in the ES to confirm the victor.  While we should prepare for either scenario, it’s important to note that, since the March 2009 rally began, frenetic day-by-day reversals on increasing daily range have been characteristic of topping action—not bottoming.  The volume profile chart, below has been adjusted to reflect the accumulated volume at price since the June 21 high.  Acceptance outside of the blue value area, from approximately 1055 to 1081 will likely…

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The Precise Take – Will the upside risk reversal last?

Big Picture Analysis:  The bulls did what they had to yesterday, first pushing above 1055 in the ES after the open, then rallying throughout the day to close materially over major resistance.  Overnight, gains have been extended and the ES is poised to open just under another major resistance area that extends up to 1091.75.  The critical question is—has anything really changed since yesterday morning?  Looking to the volume profile chart below, the ES should open in the green value area that extends down to 1084.75.  If it is rejected in the first hour, we are inclined to believe yesterday was a shakeout of weak shorts.  If it holds, chances of exceeding the mid-July 1099.25 high are…

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The Precise Take – ES gives up half its July gains

Big Picture Analysis:  The ES hit 1051.75 overnight, the 50% retracement of the most recent rally. Earnings continue to disappoint, and scheduled news is not much better, though expectations are being set very low for housing-related reports.  With three more such reports over the next week, the bulls might be able to spark some short covering on an upside surprise, but there does not appear to be any obvious bullish catalysts on the horizon.  In the chart below, the ES has entered a low volume area, roughly 1045 to 1055.  If it does not climb out of it shortly after the open, it could be a quick trip to the next lower value area centered around the 1040.75 high volume level, also the old neckline of the widely noted head and shoulders top.  Should this level give, we would expect shorts to pile on aggressively.  Above, 1072-74 is an ideal short entry area, and a close above this area with no new low below the half way mark means bulls…

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