The Precise Take – ES again testing 1037–three times a charm?

Big Picture Analysis:  Yesterday’s short term downward trend channel breakout in the ES failed, with equities grinding down all day, and lower overnight.  The ES is once again testing 1037 support, with a low likelihood of it holding.    Even the much lauded Treasury futures downward reversal on Friday has itself been nearly reversed.  The Euro is strong against most currency crosses overnight, save the Swiss Franc, which ominously broke 1.3000 support.  It looks as though preference for risk is being withdrawn across the markets, with the leaders broadcasting the potential for more.  Today features five economic reports, though none is as big as tomorrow’s ISM or Friday’s Employment Situation.

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The Precise Take – ES attempting to rally on breakout

Big Picture Analysis:  The Bernanke speech did not disappoint in terms of volatility Friday, as the equity indexes managed yet another early morning turnaround, this time to close at their highs.  Again, we have the possibility of a rally, as support held twice last week at 1037 and the ES has broken out of its downward channel (below), but there are several obstacles that shorts can use to kill any rally attempt.  There are inklings that the debt situation in Europe could start grabbing headlines soon, and the Bank of Japan has been shown to be ineffectual in attempting to reign in Yen strength.  Accordingly the Euro and Australian Dollar are down materially.  The one positive is the huge reversal in long term Treasurys Friday–the big one we had been waiting for (though we must admit we had nearly given up), with the T-Bond futures down nearly three big points.  A Treasury market slide won’t by itself create an equities rally, but it can certainly help at certain key times.  Big news items this week include Wednesday’s ISM Manufacturing Index and Friday’s Employment Situation.  The key range to watch the next few days appears to be 1055 to 1081.

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The Precise Take – Equity futures consolidating ahead of Bernanke speech

Big Picture Analysis:  GDP had been sufficiently talked down that this morning’s revision for the worse was supportive of equities.  Now, attention turns to Bernanke’s speech released at 10:00 am, though Consumer Sentiment released 5 minute prior could also cause some movement.  Per below, it’s evident the ES is still in its downward trend channel, but is basing in the blue value area.  A push above 1059 is needed to generate momentum, which sets up a move to the 1080-81 first major resistance area.  While 1040-41 is support, a break of 1045 today probably signals it will not hold.  While the Yen is weaker against most crosses, which is generally supportive of equities, 10 Year futures are treading sideways.  It would be uncharacteristic for them to top in this fashion, so we should be alert to the possibility of another up move, which would weigh on equities in the coming days.

Trading Today:  The upper end of the projected range contains price action near yesterday’s high, from 1058.25 to 1059.25.  The lower end contains yesterday’s settlement and 4:00 pm close, from 1044.75 to 1046.25.  If the lower end is reached, it has less a chance of holding the later it is reached.

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The Precise Take – Equity futures up on Jobless Claims, ahead of weekend financial summit

Big Picture Analysis:  Yesterday, the ES managed a bounce off what was major support prior to the break of the 1035-40 area on June 29.  As we write, bulls are also taking advantage of a moderately less-bad jobless claims report.  The first major upside target is the 50% retracement of the August down leg in confluence with the 50 day moving average at about 1081.  The last of the week’s large Treasury auctions is over today at 1:00 pm EDT, which was favorable to equities the prior month.  We have been waiting for a large reversal in the 10 Year to signal its massive bull run may be over, which would be supportive of equities.  Yesterday was close, but did not quite cut it, however.  The first revision to Q2 GDP is released tomorrow pre-market and, thereafter, Bernanke speaks at Jackson Hole, with many expecting hints of further easing.  Expectations of GDP have lowered significantly in the past weeks, so Bernanke could hold the key to…

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The Precise Take – Equity futures down again overnight on disappointing Durable Goods

Big Picture Analysis:  Yesterday’s early plunge down to 1044.00 in the ES on the Home Sales report had the makings of a multiday reversal, but proved to be only an intraday bear trap, as the ES hit 1041.00 on this morning’s Durable Goods report.  Some major technical levels were taken out in the leaders yesterday, which suggests more downside in equities, even if there is a brief respite.  A big downside reversal in long term Treasury futures will be an equities bullish sign to watch out for.  The ES is now entering the early July base, which should slow the decline and perhaps allow for an oversold pop.  The caveat is that the markets are susceptible to bad news and a…

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The Precise Take – Equity futures tumble overnight after failing to hold critical support

Big Picture Analysis:  After a quick run-up on yesterday’s open to kiss the 50% retracement of last week’s range, the ES headed down and closed below critical support at 1069.  Overnight, the 1055.50 first target was reached and then some (low of 1051.50).  The leaders are similarly ugly, with the EuroYen at lows not seen since September 2001, and 10 Year T-Note futures to new highs (never having closed below the 125’15 trigger).  Given the whipsaw nature of the markets over the summer, it would be reasonable to soon expect a sharp reversal to the upside to shakeout late shorts.  Our best guess is on a test of the 1045-48 support band from late June/early July price action; however, longs are risky today with this much downside momentum.  If 1045 goes, next major support is 1018-25.  Only above yesterday’s settlement of…

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The Precise Take – Equities up marginally ahead of quiet news day

Big Picture Analysis:  Friday was a quiet options expiration; however, the indexes held what we considered critical support and closed in their upper range, rallying modestly overnight.  Though 10 Yr T-Note futures did not close below the 125’15 level, they are trading below that level as we write.  Looking to the other leaders, the Euro is weak, though against the Yen it is very close to strong support from 107.9 to 108.0.  The Australian Dollar, after gapping down against the US Dollar and Yen, has recovered and is up sharply.  Accordingly, the leaders are suggesting some initial equities weakness that could reverse on a EuroYen bounce off support.  On the combined session 60 minute chart, the ES has formed an inverted head and shoulders pattern.  Acceptance above 1077 neckline suggests a rally to test the 1094.25 50% retracement level, where shorts will have the opportunity to…

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The Precise Take – ES below trading range on opex

Big Picture Analysis:  Yesterday, the ES closed just above the lower end of its 1070 to 1100 range, but broke it overnight.  We’re willing to entertain the possibility that this is a shakeout; however, for the bulls to avoid another down leg to the 1018 to 1025 support area, they will need to assert control early today.  As far as the Fed’s Treasury purchases yesterday, they amounted to an above average $3.5 billion, but there was no immediate or delayed effect with respect to equities.  Until more data is generated, there is no pattern to trade.

The Euro is down about 1% against both the US Dollar and Yen, also down again against the Swiss Franc.  We were looking for a close in 10 Year T-Note futures below 125’15 to confirm a top.  Instead, they have…

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Going forward, the Big Picture Analysis will be combined with the Leaders Analysis

The Precise Take – Equity futures maintaining after disappointing Jobless Claims

Big Picture Analysis:  Despite two consecutive selloffs on the close, action on the daily chart for the major indices looks relatively benign.  With opex tomorrow, we shouldn’t read too much into any extreme intraday moves as long as the 1070 to 1100 range is respected on a closing basis.  In fact, a swift down turn to the low 1070′s to scare out the weak longs looks increasingly probable.  The Fed will also be purchasing another $2 to 3 billion in Treasurys today.  Whether it will be as supportive of equities as it was the first half of Tuesday remains to be seen, but the potential for volatility remains as there will be two economic reports released just prior at 10:00 am.  10 Year T-Note futures appear to have started their decline, though the overnight weakness was reversed sharply on the Jobless report.  A close below 125’15 (basis Sep 10) suggests an interim top, which would be supportive of equities on any future sharp down moves–but not necessarily so on…

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Going forward, the Big Picture Analysis will be combined with the Leaders Analysis

The Precise Take – Equities consolidating yesterday’s gains ahead of opex Friday

Big Picture Analysis:  The Federal Reserve Bank of New York conducted its first Treasury permanent open market operation (POMO) yesterday–the first such since October, 2009.  Long time readers will recall that there was a strong correlation between POMO days and paint the tape closes in the second and third quarters of 2009.  Yesterday was nearly the reverse, as equities rallied throughout the morning auction and shortly thereafter, but sagged on the close.  A sample size of 1 a trend does not make, but it to seemed to be a blatant risk-supportive signal.  Also noteworthy was the large decline in 10 Year T-Note futures, suggesting that their recent parabolic rise could have been mere front-running of the Fed–financial institutions bidding up coupon Treasurys in anticipation of selling them at a profit back to the Fed.  The amount of Fed purchases ($18 billion for the first month) is a bit less than 2009, so it remains to be seen if the 2009 effect can be duplicated.  It’s also possible the money will be directed…

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