We’re on the road and unreliable wifi prevents a more thorough analysis.  Bulls have clearly taken charge early with the Euro breaking resistance mentioned yesterday.  There are a number of news items left in the day, though.  If the 1144.50 to 1045.25 lower end of the projected range, which includes day-session-only R1, breaks in the first 30 minutes, there’s the potential of this early up move being a false breakout.  Otherwise, the 1154.25 to 1155.50 is the upside target today.

The Precise Take – Equities preparing for next move with leaders at inflection points

Big Picture Analysis:  Equities have largely been treading water this week amidst the bearish seasonal headwinds we’ve discussed.  Despite a steeper than expected drop on the open yesterday in the ES, the blue value area (below) was bought at 1227.25 and, overnight, the week’s upper range was sold at 1146.75.  Though today’s news calendar is light, the balance of the week is heavy, with the big US regulatory heads speaking in front of Congress Thursday and Friday.  Accordingly, there should be ample volatility for shakeouts in either direction.  We’ve been watching 10 Year T-Note futures, which did indeed break through resistance strongly yesterday.  This did not seem to drag on equities yesterday, but any strong follow through will.  Many of the other leaders are at inflection points, where reversals would be equities bearish and continuation equities bullish.  The EuroYen and AussieYen forex crosses are at resistance, and the US Dollar Index is at 78.59 support, which it bounced off of on the European open.  The corresponding resistance level in the EuroUSD forex cross is 1.3645.  If this level breaks, a rally to 1.3900 is conceivable, which would likely take equities with it.  Accordingly, whether or not equities advance from here or pull back should be decided in the coming days, with important clues from the aforementioned leaders’ levels.

Trading Today:  The upper end includes yesterday’s settlement and 4:00 pm close, from 1141.75 to 1142.75.  The lower end contains the overnight low, closing VWAP and the daily pivots, from 1137.00 to 1138.25.

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The Precise Take – Traders buy the dip in the ES overnight

Big Picture Analysis:  Bearish seasonality from this week’s Treasury auctions and end of month profit taking seems to be exerting some influence, as the ES pulled back a bit yesterday and again over night.  Having said that, there was a strong bullish reaction off day-session-only S2 and trend channel support (see below).  Seasonalities are often not trend killers, but trend softeners, so new highs are not precluded, though we would expect them to be nominal and not material.  Still watching 10 Year T-Note futures at contract highs.  A break above would put pressure on equities and a strong downward reversal would mean the opposite.

Trading Today:  The upper end of the projected range includes day-session-only R1 and price action near yesterday afternoon’s high, from 1143.25 to 1144.50.  The lower end contains the overnight low and day-session-only S2, from 1131.25 to 1132.00.  Bears will need to keep the ES below 1144.50 today.  An early break above the overnight high of 1142.25 and subsequent downward reversal without taking out 1144.50 warns of a potential intraday bull trap. News at 10:00 am could move the markets if out of consensus.

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The Precise Take – Equity and Treasury futures up overnight – who wins today?

Big Picture Analysis:  Friday was constructive for the bulls, with the ES managing to break to new nominal highs.  Overnight, a strong push up on the open to just shy of 1150 was subsequently retraced.  We wrote last week of some potentially bearish seasonalities this week into Thursday–first, from Treasury supply (with the 2 Year auction today), and second, from end of month profit taking.  Indeed, long term Treasury futures are up overnight, with the 30 Year slightly outperforming.  Accordingly, it’s conceivable that a push above 1150 in the cash S&P 500 is a bull trap.  It’s important to note this is just a possibility, and as long as the daily pivot holds today at 1139.75, bulls remain firmly in control.

Trading Today:  The lower end of the projected range includes price action from Friday, the overnight low and the day-session-only pivot, from 1139.75 to 1142.00.  The upper end contains day-session-only R2, combined session R1 and weekly R1, from 1152.25 to 1152.75.  No major news today, so it should be quiet provided the projected range holds.

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The Precise Take – Equity futures extend gains after BoJ intervention

Big Picture Analysis:  After yesterday’s round trip in the ES away from, then back to support at 1117-18, the Bank of Japan intervened overnight, which initially lifted price from this level.  One wonders if all the Dollars they bought were plowed into ES futures on the Durable Goods report at 8:30 am, as it was nothing that would seem to warrant a seven handle move.  Regardless, bulls remain in control and the leaders are confirming.  Next week faces bearish seasonality from the big Treasury auctions on Monday through Wednesday and from end of month profit taking.  Therefore, it would behoove the bulls to get as much territory reclaimed today as possible.  If 1128.75 does not hold today, the pre-market up move is probably a head fake and bears could take over short term.

Trading Today:  The lower end of the projected range includes yesterday’s high volume level, price action and day-session-only R1, from 1128.75 to 1129.50.  The upper end includes another high volume level, price action from Wednesday and day-session-only R2, from 1137.50 to 1138.50.  Opposite to yesterday, with the ES poised to open above R1 at 1129.50, we’ll look for a potential trend up day if it holds the first 30 minutes.  Potential market moving news at 10:00 am.

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The Precise Take – Equity futures finally correct as Treasurys continue to rally

Big Picture Analysis:  Yesterday, traders pushed the ES strongly upwards on the open, but the 1140 level was soundly rejected.  Overnight, headlines out of Europe were not favorable, and Jobless Claims data in the US disappointed.   The result is the ES just south of 1120 and poised to open below the daily S1′s for the first time since the August 11 decline that kicked off the previous correction.  Similarities abound between the two periods, as we had been noting the unsustainable divergence between Treasurys and equities at the time.  Bonds won that round, and appear to be winning this one; however, 10 Year T-Note futures must still clear 126 resistance from late August.  A rejection of this level today would suggest the dip in equities is a buying opportunity.  As we said yesterday, the current rally has a good chance of finding support on a selloff, and current levels (see below) are one potential area.  We’ll also keep an on the 10-30 Year Yield spread, currently at 119 bps.  As the 30 Year is less affected by QE, it better reflects actual investor fears.  Accordingly, if it plays “catch up” with T-Notes, the spread contracts, and it warns of legitimate fear.

Trading Today:  The lower end of the projected range contains a high volume level, the overnight low and the daily S2′s, from 1116.75 to 1118.75.  The upper end contains yesterday’s low and price action, from 1126.50 to 1127.50.  If the ES cannot clear day-session-only S1 at 1124.25 in the first 30 minutes, there is the potential for a trend day down.  A rally into, then rejection of the level within a tick is the best signal.

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The Precise Take – Equity futures attempting to hold as Treasury futures and gold surge

Big Picture Analysis:  Despite new highs on the FOMC announcement (1144.00 in the ES), equities sold off into the close as they are prone to do on Fed days.  Overnight, the ES sold off further to 1129.00, where it found support.  Some interesting divergences have emerged in the leaders that warrant caution.  Most prominently, Treasury futures rallied strongly yesterday and again overnight, which is reminiscent of the early August period that precipitated a steep selloff in equities.  The current rally stands a better chance of finding support at lower levels and resuming its upward trend, but it is vulnerable here.  A strong push today above 1137.50 suggests bulls are still firmly in control and lessens the risk of selloff, but we would want to see a corresponding back-off in Treasury futures.

Trading Today:  The upper end of the projected range contains closing VWAP, the daily pivots and high volume resistance, from 1136.25 to 1137.50.  Also watch the gap area early, which is from 1134.75 to 1135.00.  The lower end contains the overnight low and daily S1′s, from 1128.75 to 1130.00.  If it is breached, we would cautiously consider longs again at 1124.50 or 1123.25 if there’s responsive buying.

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The Precise Take – Will yesterday’s gains hold?

Big Picture Analysis:  After an early push down to the day session pivot yesterday, it was off to the races for the ES on the housing report.  To answer the headline question, as long as 1130.50 holds today, we would expect to see higher highs this week.  Otherwise, the bulls would need to gather a bit more steam, with 1120 needing to hold on a closing basis.  Post-opex seasonality did not matter yesterday, and bullish FOMC seasonality may not today.  Accordingly, we’ll treat it as any other day with a big news item.  10 Year T-Note futures broke trendline resistance yesterday, though there was little follow through.  We’ll keep an eye on them into and after the report, but will not read into the movement just now.

Trading Today:  The upper end of the projected range contains weekly R2 and day-session-only R1, from 1144.00 to 1145.00.  The lower end contains  yesterday’s settlement and 4:00 pm close, as well as a high volume level, from 1136.50 to 1137.50.  As we write, yesterday’s high of 1140.25 is being tested.  If it is not broken prior to the open, the lower end may not hold.  In that case, we would hold out for the 1130.50 to 1132.25 area, where we would cautiously entertain longs.

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The Precise Take – ES still pushing against resistance ahead of FOMC day

Big Picture Analysis:  Options expiration was relatively quiet, with the cash S&P 500 closing in the lower range of the daily bar such that it is still respecting1130 resistance.  Overnight, the ES retested Friday’s open (high of 1126.75) and has backed off a bit.  Leadership and liquidity suggest an intermediate term rally is possible, but there are some headwinds this week.  Seasonality for the week after September options expiration is bearish–the best work on this subject being done by Rob Hanna at Quantifiable Edges.  Having said that, a strong push over 1127.00 in the ES suggests bulls are firmly in control and seasonality is less important.  With FOMC day tomorrow, we also have bullish seasonality starting at today’s close and lasting until just after the release of the announcement.  Expectations are for no major changes in policy.  The leader to watch today is 10 Year T-Note futures, which is bumping up against a short term downward trendline.  If broken, it portends equities weakness–a strong rejection, the opposite.

Trading Today:  The upper end of the projected range contains Friday’s day session and the overnight highs, from 1125.75 to 1126.75.  The lower end contains Friday’s settlement, high volume level, and the weekly pivot, from 1119.50 to 1120.25.  The only news of the day is at 10:00 am, and an out of consensus headline number could be a market mover.

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The Precise Take – Bull trap or breakout in equities?

Big Picture Analysis:  CPI came in within consensus and relatively flat.  Yesterday was uneventful until just after the closing bell, as the ES finally pierced through several months of resistance, climbing to 1132.75 overnight.  Given the overbought nature of the current rally, we would ordinarily be on alert for a potential bull trap.  According to research from the various quant bloggers, the week following today’s options expiration has a bearish seasonality.  Accordingly, caution is warranted with longs at these levels, especially on a break below 1118.75.

Trading Today:  The upper end of the projected range contains the daily R2′s and overnight price action, from 1130.50 to 1131.50.  The lower end contains the daily pivots and yesterday’s afternoon breakout level, from 1118.75 to 1119.75.  Our own study published yesterday reveals that the morning of options expiration has bearish seasonality, while the afternoon–especially the final hour–is bullish.  Should the reverse occur with early strength, we would not want to be caught short above 1131.50.  Consumer Sentiment could be a market mover at 9:55 am.

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