The Precise Take – Equity futures flat after unemployment rate dips to 8.9%

Big Picture Analysis:  Weak shorts were driven out yesterday, and looking below, we see the ES is simply tracing out a consolidating wedge.  If this is indeed a topping formation, it is a departure from the expanding terminal/broadening megaphone tops we’ve seen since 2009.  Headline statistics from this morning’s Employment Situation were again better than forecasted looking at the household survey, and slightly below expectations from the payrolls number (January and December revised for the better).  As we mentioned yesterday, barring a very negative report (which did not occur), today carries bullish seasonality.  The flip side is, if there is a selloff today, we expect to see the low to mid 1390′s revisited and likely broken early next week.

Trading Today:  The upper end of the projected range includes the overnight high and day-session-only R1, from 1334.25 to 1334.75.  We would also consider a short from the 1339.50 to 1340.00 resistance area, but likely not above.  The lower end of the projected range includes a high volume level from yesterday and closing VWAP, from 1324.00 to 1324.50.  We would also consider a long from the 1321.75 to 1322.25 support area, but likely not below.

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The Precise Take – Equities back to June highs

Big Picture Analysis:  The ES has now rallied into the June high area, with another impressive performance yesterday.  Signs of institutional support are abundant, which should allow this 1125-30 resistance level to be cleared.  On any pullback, the 200 day moving average at 1112 should provide support.

Leaders Analysis:  The US Dollar Index broke through another major support level overnight, this time its 200 day moving average, as the Euro continues to perform well against most other currencies.  10 Year Treasury futures shot up to new highs overnight, with the yield (inverse to price) testing the 2.90% support level, though it has now retraced a bit.  Equities and Treasurys have rallied in tandem before, but the positive correlation tends to be fleeting.  Also, the spread between the 10 and 30 Year yields has now reached 112 bps, a record that…

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We will cover this more thoroughly in tomorrow’s report with greater resolution and history.  For now, there is a clearly bullish bias in the first hour of trading on option expirations day going back two years, which becomes mildly bearish the second hour of trading.  For the eMini S&P 500:

So much for needing to tighten stops on the close, which had a perfect run up to day-session-only R1 at 1005.00.  Today’s highest point of control was exactly the same as yesterday’s (red line at 998.50) and we had a perfect equidistant rotation around it in both time and price.  See the green lines.  Not sure what the significance is, but it is interesting.

Overnight, we’re looking for a range inside the light blue box of 998.50 to tomorrow’s day-session-only R1 at 1009.00.  There are some big things happening pre-market tomorrow morning starting at 7:30 am in the form of Treasury funding announcements and job reports, so the range could easily break in the two hours before the open.

New support and resistance levels before.  Expect night action to be contained by 871.25 to the downside and 882.50 to the upside.  In depth commentary on today’s action in tomorrow’s morning report.

Countertrend short of 896.25 was the day’s high, reached just before close, but 2 pt objective was not reached into secondary close, so position should not be held any longer.  

886.25 to 901.00 is maximum predicted overnight range.  890.75 to 898.00 is tighter predicted overnight range.

Not much time, so see below.  Max expected range is 913.00 to 926.00.  Secondary expected range of 914.50 to 922.50.  Should be low volatility until 8:30 am report tomorrow.  Price closed at today’s point of control and will likely oscillate to other POC’s overnight.

The higher value area established yesterday around 921.75 was rejected early after a failure at key R1/Fib resistance of 926.25 to 927.75 from this morning’s report (high of 926.25), but the lower value area centered around the 913.00 point of control has held.  Expect low volatility perhaps until the 7:30 and 8:15 employment-related reports tomorrow that people will be looking to ahead of Thursday’s big employment report.  Predicted maximum high and low are 921.75 and 909.50, respectively.  Support/resistance is marked below.

Incidentally, we’re opening up just shy of July’s monthly pivot of 917.50 after failing to close all week (on a 60 min chart) above June’s R1 of 924.25.

The ES has established value around a new minor point of control at 921.75 on a very low volatility/volume day.  Overnight, longs will likely come in at 919.00 (day-session-only pivot), then 915.50 (50% retracement off Globex range), then major point of control at 913.00, which we expect will contain price action until the 9:00 am EDT housing report.  To the upside, 922.50 to 924.00 (today’s point of control to today’s high) will serve as heaviest resistance, then Fib/daily R1 confluence from 926.25 to 927.75, which should contain price overnight as well.

We’re rolling into the September 2009 contract and all charts will be in such (until Dec 09 becomes the front month).  We do note, however, that for the sixth day in a row, the June 09 contract closed within in a 4 point range (and below the 942.75 Jan 6 2009 high).  Closing for 6 days within 4 points has only happened 5 previous times in the history of the futures contract going back to October 1997 (no occurrences prior to August 23, 2005), with 4 of the 5 times resulting in declines upon the break of the range, and only one of those declines being severe (see below).  We mention this mainly as a curiosity and a warning that any break of a consolidation can result in a large move.  We believe the financials will lead and are still monitoring the Nasdaq bank index and the XLF financials ETF, both of which stalled at resistance today.

The other dates matching the criteria are (chart below):

Aug 23 2005
October 11 2006
November 23 2006
February 22 2007 (largest point spread over following 3 days = 69 pts)
April 8, 2008

In the Sep 09 contract, the close at 938.00 is also a 50% retracement from yesterday’s lows.  932.75 should offer support and 940.00, then 942.50, then 948.25 should offer resistance.