Big Picture Analysis – A disappointing Philadelphia Fed print yesterday eventually got the best of the risk markets, with the steep drop into the close now trimming approximately 8% from the S&P 500 measured from the April high.  Accordingly, we are approaching the levels at which corrections in cyclical bull markets typically bottom out, and it will be incumbent upon bulls to stop the bleeding into the end of May. Though headline risk can easily overcome seasonality, we do note that options expiration day tends to have bearish seasonality early, which can turn bullish late into the close.  There’s no scheduled news for today.

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Big Picture Analysis - The slow motion decent in the US indexes continues, as each day seems to make a new nominal low into the close.  Being a day away from options expiration, we might see this trend temporarily abate due to mean reversion seasonality, but it would take more than a day’s price action for the bulls to prove they are back in charge.  Philadelphia Fed Survey at 10:00 am EST along with two other minor reports ought to move the markets.

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Big Picture Analysis – Yesterday, weakness won out into the close, as the ES was driven into the low 1320′s, perhaps foreshadowing a more extended downward move over the coming week.  Any upside over the next day ought to attract new shorts up to ~1350, though above will force short covering.  FOMC Minutes today at 2:00 pm are the only major economic news.

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Big Picture Analysis – After heading lower early yesterday, the ES rallied into mid-day, but once again stalled and closed near the lows.  The overnight range has exceeded yesterday’s day session in both directions and, after a slew of reports this morning, the ES is heading lower again.  There are a couple of releases at 10:00 am EST this morning, but we might see the markets continue to be driven by headline risk out of Greece.  The markets are oversold on a short term basis, so we see either a bear trap opening, which closes above yesterday’s high today, or materially lower lows, which gets the market oversold-er.

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Big Picture Analysis – After a strong showing early Friday in the ES, most of the day’s gains were given back into the close.   Overnight, a new recent low at 1335.75 was made on continued worries out of Greece, and risk of another material leg down have increased.  Having said that, a quick pop to ~1350 to shake out weak shorts would be in line with recent trading patterns, and acceptance above would force more serious short covering.  No economic releases today, so it should either be a quiet day or one dominated by headline risk.

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Big Picture Analysis – For a change of pace, headline risk emerged in the US after hours yesterday, as admissions about trading hedging losses at JPM led to a quick test of 1344.00 in the ES.  While probes into the lower part of the recent trading range have led to sizable bounces, traders should heed the general maxim that the more times a level is tested, the more likely it is to break, and with size.  Consumer Sentiment at 9:55 am EST could be a market mover.

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Big Picture Analysis – Yesterday, after a brief dip below 1340 in the ES, traders again rallied to positive territory, but could not close strong.  On the daily combined session chart, the ES has strongly rejected ~1340 support three times now.  Resistance looms up to ~1370, but a push above could see a quick pop for another ten handles.  Conversely, if support  finally breaks, another strong down leg should commence.  No major news today, though a speech by Bernanke will be released on the opening bell.

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Big Picture Analysis – Headline risk out of Europe finally got the best of the risk markets, with the ES hitting 1342.50 overnight, just shy of the nominal MIDAS curve launched from the December 19, 2011 low.  As we write, the ES is up seventeen handles and is on the verge of filling the professional gap.  While more downside is in the cards for this week, given the strength of the rebound (so far), we should also be prepared for the possibility that the overnight probe marks an intermediate term low, not unlike the October 4, 2011 low.  If that’s the case, we would want to see strength continue after the open with a close at or near highs.  With no scheduled economic news today, expect European rumors to move the markets today as the elections are digested.

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Big Picture Analysis – Yesterday, the ES broke 1390 support we wanted to see hold and has retraced just over half the late April rally.  Risk markets were down further on this morning’s disappointing payrolls data from the Unemployment Situation.  All is not lost for the bulls, as a snapback rally today would chase out recent shorts, but another test of the low 1350′s would likely not hold.

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Big Picture Analysis – Despite jitters regarding elections and other matters in Europe, the US indexes continue to be driven by US economic data, with jobs data in the forefront, culminating in tomorrow’s monthly Employment Situation report.  The case could be made for a head and shoulders formation on the 135 minute below, with ~1390 to ~1405  the range to break.  Today, Non-Manufacturing ISM at 10:00 am EST could be a market mover if out of consensus.

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Big Picture Analysis – Focus today will be on ISM at 10:00 am EST.

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Big Picture Analysis – Continuing our comments from Friday, it indeed looks like the ES is consolidating after reaching the upper end of its trend channel on the 135 minute.  It’s a news heavy week, with Chicago PMI at 9:42 am EST and the Dallas Fed  Survey at 10:00 am today, then ISM tomorrow.  Focus shifts mid-week to employment, culminating in Friday’s Unemployment Situation.  Headline risk out of Europe has been muted recently.  If that continues and the US reports don’t disappoint too much, we should see higher highs in the indexes.

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Big Picture Analysis – Gains in US equities were extended yesterday and overnight, with bulls asserting control, despite a GDP miss this morning.  As we write, the ES has reached the upper extreme in its trend channel below.  While the case for consolidation here could be made, markets can always potentially become more overbought.  Consumer Sentiment today at 9:55 am could be a market mover if out of consensus.

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Big Picture Analysis – Yesterday’s FOMC releases did not surprise (as expected), but Bernanke’s comments about leaving the door open to another round of asset purchases at some unspecified time in the future helped buoy the risk markets.  Last Summer and Fall, recent strength like this would have been more suspect, but given the long term strength this year into late March, odds are for an upside breakout.  Bulls are not out of the woods yet, and a breach of ~1370 puts them in trouble.

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Big Picture Analysis – After Monday’s dip below support, appearing as though the bear flag on the 135 minute had broken to the downside, a bit of strength yesterday, followed by a big beat by Apple after the bell has facilitated a rally overnight to 1382.00.  With the ES poised to open in the upper 1370′s, any early strength might lead to some short covering ahead of the FOMC announcements.  However, with the extreme of the daily R3 floor trader pivot having been reached, the ES could just as easily work off enthusiasm in the opening hour.  As to the FOMC, the first release is the Meeting Announcement at 12:30 pm EST, followed by the Central Tendency forecasts at 2:00 pm, followed by Chairman Bernanke’s press conference at 2:15 pm, which should last to about 3:00 pm.  No surprises are expected.  Nonetheless small details can to produce large intraday movements with the order book thin and liquidity low.

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Big Picture Analysis – After a low range opex Friday, overnight, weakness in Asian and European trading has led the ES to break to the downside the bear flag we noted last week.  Accordingly, more likely than not, we should see materially lower prices.  A break above ~1375 would force short covering, however, and there is no shortage of opportunities for economic surprises this week.  No releases today, but looking ahead, we have an FOMC Announcement on Wednesday, along with GDP on Friday, in addition to several medium tier releases tomorrow and Thursday.

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Big Picture Analysis – Yesterday, the markets sold off after a disappointing Philadelphia Fed Survey, though the ES has retraced about half its losses overnight.  In the 135 minute below, the upward trending channel appears to be a bear flag which, if fulfilled, points to a target of about 1325–roughly a 7% correction off the highs.  While it remains to be seen if this will play out, it would fit the narrative, as Europe is not in great shape, but not so bad that immediate intervention is likely.  A push above 1387-90 would like force serious short covering, however.

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Big Picture Analysis – After the ES made a new overnight high for the week to 1390.00, weakness in Europe, followed by a disappointing Jobless Claims this morning led to a breach of yesterday’s lows, and the ES looks to open about flat.  Three reports at 10:00 am today, including the Philadelphia Fed Survey, should move the markets, and today could prove pivotal in terms of setting up a move with legs into next week.  Tomorrow is also options expiration.

Do to technical problems, we are not able to produce the support and resistance chart today.

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Big Picture Analysis – Yesterday, the ES poked above the upper end of strong resistance that we had noted at 1387, but it took a five handle nose dive into the close, and was down to 1377.75 as we write.  On the daily chart, the 20 day moving average has shaped up as the resistance line to beat. As we noted yesterday, daily range has increased and headline risk has become more of a factor recently.  Traders should adjust leverage accordingly.  While the only news today is the EIA Petroleum report at 10:30 am EST, traders are looking ahead to tomorrow’s Spanish bond auction for hints of stability or weakness in the periphery.

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