The Precise Take – Equity futures spike higher on Retail Sales

Leaders Analysis:  The US Dollar Index broke down through its consolidating wedge and has reached support.  While we expect it to go lower next week, there is a good chance it will retrace upwards a bit first.  The EuroYen has traded up to its 20 day moving average and 30 Year T-Bond yields are up after going down on yesterday’s 30 year auction and hitting support.  Because of the extended moves into support/resistance and possibility of reversal, for today, the leaders are slightly equities bearish.

Medium Term Analysis:  As of Monday, we will switch to the June 2010 contract.  Yesterday’s afternoon rally finally produced the breakout from the January high, which was continued overnight and extended on the Retail Sales report.  The spike up on the report into strong resistance and subsequent retracement is a bit bearish, and given the overbought status of the ES, we would not be surprised to see…

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The Precise Take – Equity futures correcting mildly overnight into news vacuum

Leaders Analysis:  Our focus is on the US Dollar, as it appears to be making a consolidating wedge formation on the daily rather than extending the down move initiated last week.  Under the consolidation scenario, it should sell off when the index hits 81.00 to 81.25 by tomorrow, then find support between 80.00 to 80.25.  If it breaks through these levels on a closing basis, a large move could get underway again, with equities following inversely.  With the EuroYen down overnight and not quite yet to support, for today, the leaders are slightly equities bearish.

Medium Term Analysis:  The ES is down overnight for the first time since late February, so it looks like equities will correct a bit before attempting to head higher.  We mentioned the weekly pivot at 1126.50 as the likely target yesterday and stand by it.  The rally is not in jeopardy, however, unless the value area centered around the 1118.00 high volume level gives way.  With no scheduled news, traders will become introspective and question whether we have a double top on the weekly, which should turn sentiment bearish over the next few days unless the rally resumes.  It is exactly this bearish sentiment that…

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The Precise Take – Equity futures poised to test yesterday’s high ahead of Employment Situation

Leaders Analysis:  As we noted intraday yesterday, the US Dollar Index broke major support and sold off sharply.  The bottom coincided with the end of the equities rally yesterday.  Overnight, the 20 day moving average, which prior served as support, became resistance.  The Dollar tends to consolidate after important moves, so we don’t expect another major move until tomorrow’s Employment Situation.  The other leaders are not making any moves of note, so the leaders are equities neutral today.

Medium Term Analysis:  Not much to add from prior day’s commentary.  Focus will be on tomorrow’s Employment Situation report, which is expected to be bad because of the February blizzards.  The ES is at a precarious point.  It needs to soon…

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The Precise Take – Markets looking to consolidate ahead of Employment Situation

Leaders Analysis:  The EuroYen is on the verge of breaking to the upside after basing for several days.  Gold closed over its 50% retracement of its down leg and is up nominally overnight.  The 30 Year T-Bond yield is still hugging its long term trendline support, but has been spending more time below it than above, thus not confirming the other leaders.  The US Dollar Index is at the bottom of its trading range, which could be equities bearish, because it has rallied the prior times it hit this support level.  However, and very importantly, it is below its 20 day moving average, which has acted as strong support since the January 20, 2010 breakout.  A close below should finally facilitate a larger retracement downwards and help equities break through resistance.  If it closes above, it could move up to the upper end of its range again, which would probably be concurrent with a correction in equities.   For today, the leaders are slightly equities bullish.

Medium Term Analysis:  Today should be relatively quiet, but the action will pick up a bit tomorrow and get going Friday with the Employment Situation.  An expected poor headline statistic due to the harsh winter is now being widely discussed.  Regardless, poor readings that cause equities to gap down tend to get reversed intraday, and vice versa for good readings that cause gap ups.  Next week will be relatively quiet with some long term Treasury auctions, then Retail Sales on Friday.  Lack of news after Friday could cause some back and fill in equities if they have not cleared major resistance.  For now, that number is…

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The Precise Take – Equities to gap up again into resistance.

Leaders Analysis:  Overnight, the US Dollar Index rejected the same resistance area as the previous day and is back in the middle of its trading range.  We probably won’t mention it again until it breaks its range is it has not been predictive lately.  The EuroYen is basing and looks poised to rally.  Though the 30 Year T-Bond yield broke strong trendline resistance last week, it may be a false breakdown because it is up over the trendline again this morning.  All in all, the leaders are slightly equities bullish.

Medium Term Analysis:  What is notable about the level reached overnight in the ES (1122.75) is that it is the 76.4% retracement of the entire down leg, which would make the second such retracement in a row.  The February 5 low was a 76.4% retracement from the October low to the January high.  This pattern, which occurs intraday, is more rare on the daily, but can perform four or five such retracements in a row.  If the ES closes over 1123, the pattern is negated but, if not, 1060 is the next downside target.  Given the strength of yesterday’s rally, we expect follow through by tomorrow.  But amidst all the bullishness, we also feel compelled to…

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The Precise Take – Equity futures higher overnight ahead of ISM

Leaders Analysis:  After selling off to its 20 day moving average Friday, the US Dollar Index rallied strongly overnight on British Pound weakness to the upper end of its two week range.  The EuroYen traded first up, then down, and is at Friday’s low.  The 30 Year T-Bond yield closed decisively below long term trend line support Friday and is up marginally on the open.  A continuation of the trend down in yield (and up in the futures) does not preclude equities gains, but a concurrent US Dollar rally would make any equities gains more difficult to come by.  With ISM Manufacturing today, the direction could be set into Friday’s Employment Situation report.  For now (at least until 10:00 am), the leaders are slightly equities bearish.

Medium Term Analysis:  The ES was strong enough overnight to test the most recent swing high at 1112.75 and subsequently traded down on the US Dollar rally.  However, it is accepting in the green value area (below).  If it continues to accept here or rally after ISM today, the next…

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The Precise Take – February poised to close on a volatile note.

Leaders Analysis:  Most of the leaders reversed yesterday in line with the afternoon equities rally.  The US Dollar Index is forming a consolidating wedge and is one to watch.  If it were to top this week, we thought it would have done so more convincingly by now; however, as long as it is consolidating, it can still do so, but needs to do so soon.  The 30 Year yield is trading at long term trendline support that has three points of contact since late September, having bounced most recently earlier in the month.  A break down should lead to a test of at least the 200 day moving average, currently at 4.40%.  A concurrent Dollar decline and equities rally is not out of the question, but would be slightly unusual, so this will be an important leader to watch.  A bounce would lead to a retest of the 4.75% level and possible break.

Medium Term Analysis:  Yesterday proved to be a difficult day to predict, as the 1082 to 1085 support level in the ES that we had dismissed the day before indeed proved to be strong support.  Overnight, the ES rallied but rejected the 1107.50 high volume level we have been watching.  Until the ES accepts around this area, it will not be able to move higher.  With three reports today between 9:42 and 10:00 am and rumors regarding Greek debt, there should be…

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The Precise Take – The risk trade is at a critical juncture

Leaders Analysis:  The EuroYen sold off again overnight to make a new 52 week low.  In fact, it passed through the 120 level (on the way up) exactly a year and a day ago.  The US Dollar Index is correspondingly up, but only nominally and has not exceeded last week’s high.  30 Year T-Bond futures are up, with the yield breaking moving average support and approaching long term trendline support, despite yesterday’s poor 5 year auction.  It’s increasingly looking like the US Dollar will break resistance and rally higher.  We will know after tomorrow’s GDP report at 8:30 am.  All in all, the leaders are slightly equities bearish.

Medium Term Analysis:  Overnight, the ES sold off from yesterday’s settlement after having failed intraday yesterday to accept in the green value area below.  Jobless Claims disappointed as we write and the ES is down to critical support.  As we said yesterday, if it closes below 1090, it should test at least 1060 to 1070.  There are a number of economic reports tomorrow, which will provide…

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The Precise Take – Markets consolidating ahead of Bernanke testimony

Leaders Analysis:  The EuroYen sold off hard yesterday to strong support at the ~121.5 level.  The US Dollar had already made most of its up move by the open, but did manage to extend a bit on the equities selloff.  30 Yr T-Bond futures had a big up day, rallying to the 20 day moving average.  Overnight, all three are consolidating yesterday’s moves, and are equities neutral.

Medium Term Analysis:  Yesterday’s equities selloff was capped at about the 1090 level in the ES, which did not have much particular significance except that it was just below the lower end of the value area highlighted below in green.  Our hypothesis of the US Dollar topping this week (and supporting an equities rally) was based partly on a cooling of the Greece situation, which instead flared up again yesterday.  Accordingly, we no longer believe that…

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The Precise Take – Equity futures down overnight on Euro zone weakness

Leaders Analysis:  The EuroYen closed below its 20 day moving average yesterday, after closing above it Friday, and it is down again overnight.  The US Dollar Index is net up from yesterday’s close after hitting fib support overnight.  30 Year T-Bond futures are not saying much as they are forming a consolidating wedge.  All in all, the leaders are equities bearish.

Medium Term Analysis:  Yesterday, equity longs were not able to capitalize on a favorable gap up, with the ES trading below yesterday’s low overnight.  Our guess is equities will correct a bit before attempting to continue the rally.  In the ES, 1094 to 1097 is strong support, containing a long term high volume level, along with the monthly and weekly pivots.  If that cannot hold, there is long term pivot, moving average and fib support from 1082 to 1085.  Yesterday San Francisco FRB President Yellen spoke and attempted to allay fears that the Fed would…

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