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.

5:12 pm EDT:  We noted in the morning report that the price had reached last Friday’s weak market profile point of control within a tick (955.00 high) and, in the 10:28 am update, posted the 30 minute support and resistance chart update with a green vertical line from the overnight high to the 941.25 point of control with an identical one drawn from 941.25 downwards.  The below 10 minute chart has these same lines and you can see how the low of the day was within half a point of the projection (927.00 low).  By the close, the ES retraced to within a tick of the 941.25 POC, thus completing a perfect 360 degree sinusoidal oscillation today.  The bottom line is 941.25 is the number to watch tomorrow, and we note that we have still not closed above the Jan 6 2009 high of 942.75.

Overnight, if the ES can break above 941.25, it will likely be contained by today’s minor point of control at 950.00 in confluence with day-session-only R1 at 951.50.  If this does not contain price, the confluence of Globex R1, today’s high and weak POC from 954.50 to 955.25 should.  To the downside, long term and today’s point of control confluence are at932.00 to 932.75, with 6 levels of confluence between 925.75 to 928.00.

Update on earlier post:  We mistakenly reported that the 50 day moving average had crossed over the 200 in the ES, SPY and cash S&P 500, when it was only the 20 day that had done so.  Though the 20 closed over the 200, this is not as strong a signal as the 50 doing so.