The Precise Take – Will Employment Situation gains hold?

Leaders Analysis:  After a volatile reaction to the report, it is too early to tell what the leaders are saying.  However, the US Dollar Index is up, along with the EuroYen and equities.  It is unlikely that correlations that have persisted for greater than a year have broken, and it may take a day or two for them to get back in line.

Medium Term Analysis:  The move of the ES into the 1127 to 1147 January high range is good for equity longs, but there is a historical tendency for gaps on the Employment Situation report to not only be filled intraday, but also get continuation in the direction of the gap fill.  For the medium term, the report can mark interim highs and lows.  The December 2009 report precipitated a mild two day correction.  The January 2010 report precipitated a seven day consolidation that became the 2009 rally highs.  We should note that this is only a seasonality, and…

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9:27 am EDT:  The ES is poised to gap below day-session-only S2, which gives the strong possibility of a trend down day.  If bulls cannot rally from the getgo, they are in trouble.  Yesterday’s overnight and day session lows is now a sell area, from 1092.50 to 1093.75.

The Precise Take – Equity futures again quiet overnight ahead of Retail Sales tomorrow

Leaders Analysis:  The leaders are not saying much as they are mostly in yesterday’s range, except for 30 year T-Bond futures, which have had a bearish week and are posting  a nominal new low for the week overnight.  They are, however, at strong support.  All in all, the leaders are equities neutral

Medium Term Analysis:  Nothing new to add from the previous days’ commentary.  Retail sales could be a market mover tomorrow if it’s not within consensus.  After that, nothing major until CPI the following Friday.

Trading Today:  Similar setup to yesterday, with the ES oscillating around VWAP overnight and looking like it will open around the day’s value area.  The upper end of the projected range contains the daily R1’s and yesterday’s high, from 1071.00 to 1072.50.  The lower end contains yesterday’s low and the daily S1’s, from 1055.50 to 1056.25.  There is very little resistance above 1072.50, up to day-session-only R2 at 1079.00, so this would be a good day for the bulls to attempt…

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The Precise Take – Equities recovered a bit yesterday, but now encountering strong resistance

Leaders Analysis:  The US Dollar Index sold off but subsequently bounced strongly overnight, the EuroYen has continued its advance, and 30 Year T-Bond futures are down marginally, but consolidating.  All in all, the leaders are equities neutral

Medium Term Analysis:  The ES had a bullish showing yesterday, but has advanced enough to get shorts interested.  It will need to clear 1109 to avert new lows.  Estimates for Friday’s Employment Situation are generally negative; however, the ES has a chance to rally on a consensus number.

Trading Today:  As we write, the ES is breaking down through strong support that includes the daily pivots, closing VWAP, and a long term high volume level, from 1093.50 to 1094.25.  Below that there is virtually no support to…

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The Precise Take – Equities trying to maintain ahead of FOMC Announcement

Leaders Analysis:  The leaders are flat overnight, with the US Dollar still at critical resistance. 

Medium Term Analysis:  Uncertainty still looms regarding the Bernanke vote and to what extent banks will be affected by the new Volcker proposals.  With GDP on Friday, we expect volatility and a resolution of the fate of this correction. 

Trading Today:  On the morning of an FOMC Announcement day, the ES would typically be up by five points or more from the prior close; however, the ES has not been able to muster a move through closing VWAP at 1092.50.  If the seasonality holds, we should see a bullish day until after the Announcement, with downward move beginning anywhere from 2:30 pm to 3:00 pm.  As noted above, however, the day is…

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The Precise Take – ES flat on Retail Sales ahead of CPI and opex Friday

Leaders Analysis:   30 Year T-Bond futures have not been able to capitalize on Tuesday’s breakout, but have a good chance to rally on a tepid to cold CPI tomorrow.  Also, the 30 Year auction is today, but the auctions this week haven’t been producing much volatility.  The EuroYen is rangebound and not offering much guidance, and the US Dollar is up marginally from yesterday.  All in all, the leaders are equities neutral.

Medium Term Analysis:  Not much to add from yesterday’s commentary, except that the ES had its biggest day-session range since December 4 and intraday volatility is returning as expected. 

Trading Today:  As we write, retail sales for December came in below expectations and jobless claims came in at the upper end of expectations, which should both be bearish for equities.  However, the ES has barely budged, so the bulls appear to remain in control.  If the ES can break above yesterday’s high of 1145.25, there is a good chance of hitting…

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The Precise Take – ES back to bottom of range ahead of Quadruple Witching Friday

Leaders Analysis:   Once again the major move has been overnight, with the US Dollar Index reaching its first upside target of 77.82 to the cent, which is the 50% retracement from the June 8 interim high.  The 61.8% retracement is 78.68, and it will be important to monitor price action in this Fib box.  The EuroYen had been consolidating in a wedge just under its 50 day moving average and sold off overnight, and 30 Year T-Bond futures are now advancing off support.  The current trends will likely last until T-Bonds advance to moving average resistance in the mid 119 to mid 120 area.  Until then, equities will probably continue to chop sideways to down.  If there is a high in the USD Index for a day, then equities could climb back up toward the top of their range.  If 77.82 is materially exceeded, the ES will probably slide down further.

Medium Term Analysis:    As expected, the FOMC did not make any waves yesterday, though they did shorten the time frame for winding down Agency and Agency MBS purchases (QE) from the end of March 2010 to the beginning of February.  How the mortgage markets will function without the Fed as market maker remains to be seen; however, that is beyond the scope of the medium term.  We still expect an end of year rally, but it looks like weak longs need to be shaken out first.  After the ES failed to take out weekly R1 three days in a row, it was a good bet that there would be a return to at least the weekly pivot at 1096.50, which was why we picked this as a downside target yesterday afternoon.    

Trading Today:  The preferred early trade is to be long with a target of overnight VWAP at 1100.25 to the daily S1’s at 1101.75, where we may…

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The Precise Take – ES consolidating gains ahead of tomorrow’s CPI

Leaders Analysis:  Despite yesterday morning’s large gains in equities, 30 Yr T-Bonds pushed higher throughout the day, especially after Bernanke’s noon remarks.  Interestingly, the EuroYen trended lower all day and overnight, so both were non-confirming of equities strength.  Unless the 9:00 am Treasury International Capital report shows a flight from Treasuries and causes T-Bonds to reverse, their strength should catch up with equities today, and we would be surprised to see material equities gains.

Medium Term Analysis:  After PPI (out as we write), there are four more major reports in the next 24 hours, culminating with CPI tomorrow at 8:30 am.  An extreme divergence from consensus could always create volatility, but this should be a range day otherwise.  As we wrote yesterday, this has been about the time when previous month’s rallies begin their topping process.  This does not preclude new highs this week, but longs should be on alert, especially in light of the T-Bonds breakout yesterday.  

Trading Today:  The ES sold off yesterday’s settlement in confluence with closing VWAP all night (actual high 1107.00).  However, yesterday’s point of control at 1107.50 and weekly R1 at 1108.25 loom just above, which creates the possibility of an early bull trap with a break of the overnight high.  If that occurs, there should be a…

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The Precise Take – ES marginally higher overnight into critical economic report week

Leaders Analysis:   The EuroYen has slowed its ascent as it approaches long term resistance, 30 Year T-Bond futures are resting at support, and gold continues to consolidate in a pennant formation.  This points to a pivotal week for the equities rally, but no clues yet as to direction.

Medium Term Analysis:  The two reports this week that will draw the most attention are Durable Goods on Wednesday and GDP on Thursday.  CS Home Price Idx and Consumer Confidence are also important tomorrow, and there are a number of large Treasury auctions that will be closely watched.  Swing and position shorts will be looking for entries on any minor equities rallies, so it will likely take an upside surprise in DG or GDP to force them to cover.  Next week features an FOMC meeting and the monthly Employment Situation, which will likely facilitate the ultimate directional move. 

Trading Today:  There is heavy resistance between the daily pivots and weekly pivot from 1080.50 to 1082.00, which provides the ideal early day trade short entry.  Just above, a long term market profile point of control at 1084.25 provides a protective stop.  We would not give that level more than a point on a short because…

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