Big Picture Analysis:  It’s been an eventful summer, though not evident looking at the net price change from the end of April.  After a better than expected (though within the characteristically wide consensus range) Employment Situation report, the ES is up 6% off Tuesday’s low.  Any short term equities bull that got long this week is sitting comfortably now, and any bear that got short is sweating.  Those that had an opinion but are flat will probably sit out the three day weekend and wait to see what Tuesday brings.  With the ES overbought and having hit major weekly and monthly pivot confluence, the possibility exists that high volume short covering after the opening will be used to cover existing long positions.  Though this doesn’t necessarily mean the rally is over, we would be especially weary with longs unless and until there is a strong bounce from either day-session-only R1 (1093.50) or R2 (1097.75), or until 1105.00 is broken to the upside.  As expected, all risk markets are flashing bullish signals, with long term Treasurys putting in what (for the second time in as much as a week) looks like a definitive top.

Trading Today:  The upper end of the projected range contains weekly R2, day-session-only R3 and monthly R1, from 1103.50 to 1105.00.  The lower end contains overnight price action and day-session-only R1, from 1092.00 to 1093.50.

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Big Picture Analysis:  Yesterday’s gain in the equity indexes was impressive, with the ES able to close inside a major resistance area, with nominal highs above it this morning after the weekly Jobless data.  1082.25 is the 50% retracement of the entire August down leg, which we mention because these major retracement levels have stopped the ES cold many times over the summer.  Should the ES open and push above early, then it will be a major accomplishment for the bulls.  If the ES sells off from this level, a push below 1074-76 could gain momentum and put the shorts in control again.  After yesterday’s big gain, and with tomorrow’s monthly Employment Situation, we could see some early volatility, especially around the housing report at 10:00 am, but the markets should settle down in the afternoon.

Trading Today:  The upper end of the projected range contains weekly R1 and the overnight high, from 1083.75 to 1084.75.  If it is broken, the area from 1089.00 to 1089.75 is the next target and would be the likely maximum bound.  The lower end contains the day-session-only pivot and price action from yesterday, from 1074.75 to 1075.25.

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Big Picture Analysis:  Yesterday, the third test of 1037 was a charm–for the time being–as a strong close yesterday precipitated an overnight rise to test Monday’s opening area in the low 1060′s.  We would expect shorts to re-exert at the 1069-71 resistance area or 1077-81 area.  The risk markets are friendlier overnight, with the US Dollar down, and the Euro up, against their major crosses.  The three day US Labor Day weekend lies ahead with some major reports in the interim, beginning with ISM today at 10:00 am.  We may not get an intermediate term trend underway until traders return next Tuesday, so be on alert for continued reversals.

Trading Today:  The upper end of the projected range contains the new monthly pivot and day-session-only R3, from 1069.00 to 1071.00.  The 1062.25 to 1063.75 area is also strong resistance and contains the daily R2′s and previous price action.  The lower end contains yesterday’s high and day-session-only R1, from 1053.50 to 1055.25.

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Big Picture Analysis:  Yesterday’s short term downward trend channel breakout in the ES failed, with equities grinding down all day, and lower overnight.  The ES is once again testing 1037 support, with a low likelihood of it holding.    Even the much lauded Treasury futures downward reversal on Friday has itself been nearly reversed.  The Euro is strong against most currency crosses overnight, save the Swiss Franc, which ominously broke 1.3000 support.  It looks as though preference for risk is being withdrawn across the markets, with the leaders broadcasting the potential for more.  Today features five economic reports, though none is as big as tomorrow’s ISM or Friday’s Employment Situation.

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Big Picture Analysis:  The Bernanke speech did not disappoint in terms of volatility Friday, as the equity indexes managed yet another early morning turnaround, this time to close at their highs.  Again, we have the possibility of a rally, as support held twice last week at 1037 and the ES has broken out of its downward channel (below), but there are several obstacles that shorts can use to kill any rally attempt.  There are inklings that the debt situation in Europe could start grabbing headlines soon, and the Bank of Japan has been shown to be ineffectual in attempting to reign in Yen strength.  Accordingly the Euro and Australian Dollar are down materially.  The one positive is the huge reversal in long term Treasurys Friday–the big one we had been waiting for (though we must admit we had nearly given up), with the T-Bond futures down nearly three big points.  A Treasury market slide won’t by itself create an equities rally, but it can certainly help at certain key times.  Big news items this week include Wednesday’s ISM Manufacturing Index and Friday’s Employment Situation.  The key range to watch the next few days appears to be 1055 to 1081.

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Big Picture Analysis:  GDP had been sufficiently talked down that this morning’s revision for the worse was supportive of equities.  Now, attention turns to Bernanke’s speech released at 10:00 am, though Consumer Sentiment released 5 minute prior could also cause some movement.  Per below, it’s evident the ES is still in its downward trend channel, but is basing in the blue value area.  A push above 1059 is needed to generate momentum, which sets up a move to the 1080-81 first major resistance area.  While 1040-41 is support, a break of 1045 today probably signals it will not hold.  While the Yen is weaker against most crosses, which is generally supportive of equities, 10 Year futures are treading sideways.  It would be uncharacteristic for them to top in this fashion, so we should be alert to the possibility of another up move, which would weigh on equities in the coming days.

Trading Today:  The upper end of the projected range contains price action near yesterday’s high, from 1058.25 to 1059.25.  The lower end contains yesterday’s settlement and 4:00 pm close, from 1044.75 to 1046.25.  If the lower end is reached, it has less a chance of holding the later it is reached.

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Big Picture Analysis:  Yesterday, the ES managed a bounce off what was major support prior to the break of the 1035-40 area on June 29.  As we write, bulls are also taking advantage of a moderately less-bad jobless claims report.  The first major upside target is the 50% retracement of the August down leg in confluence with the 50 day moving average at about 1081.  The last of the week’s large Treasury auctions is over today at 1:00 pm EDT, which was favorable to equities the prior month.  We have been waiting for a large reversal in the 10 Year to signal its massive bull run may be over, which would be supportive of equities.  Yesterday was close, but did not quite cut it, however.  The first revision to Q2 GDP is released tomorrow pre-market and, thereafter, Bernanke speaks at Jackson Hole, with many expecting hints of further easing.  Expectations of GDP have lowered significantly in the past weeks, so Bernanke could hold the key to…

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Big Picture Analysis:  Yesterday’s early plunge down to 1044.00 in the ES on the Home Sales report had the makings of a multiday reversal, but proved to be only an intraday bear trap, as the ES hit 1041.00 on this morning’s Durable Goods report.  Some major technical levels were taken out in the leaders yesterday, which suggests more downside in equities, even if there is a brief respite.  A big downside reversal in long term Treasury futures will be an equities bullish sign to watch out for.  The ES is now entering the early July base, which should slow the decline and perhaps allow for an oversold pop.  The caveat is that the markets are susceptible to bad news and a…

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Big Picture Analysis:  After a quick run-up on yesterday’s open to kiss the 50% retracement of last week’s range, the ES headed down and closed below critical support at 1069.  Overnight, the 1055.50 first target was reached and then some (low of 1051.50).  The leaders are similarly ugly, with the EuroYen at lows not seen since September 2001, and 10 Year T-Note futures to new highs (never having closed below the 125’15 trigger).  Given the whipsaw nature of the markets over the summer, it would be reasonable to soon expect a sharp reversal to the upside to shakeout late shorts.  Our best guess is on a test of the 1045-48 support band from late June/early July price action; however, longs are risky today with this much downside momentum.  If 1045 goes, next major support is 1018-25.  Only above yesterday’s settlement of…

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Big Picture Analysis:  Friday was a quiet options expiration; however, the indexes held what we considered critical support and closed in their upper range, rallying modestly overnight.  Though 10 Yr T-Note futures did not close below the 125’15 level, they are trading below that level as we write.  Looking to the other leaders, the Euro is weak, though against the Yen it is very close to strong support from 107.9 to 108.0.  The Australian Dollar, after gapping down against the US Dollar and Yen, has recovered and is up sharply.  Accordingly, the leaders are suggesting some initial equities weakness that could reverse on a EuroYen bounce off support.  On the combined session 60 minute chart, the ES has formed an inverted head and shoulders pattern.  Acceptance above 1077 neckline suggests a rally to test the 1094.25 50% retracement level, where shorts will have the opportunity to…

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Big Picture Analysis:  Yesterday, the ES closed just above the lower end of its 1070 to 1100 range, but broke it overnight.  We’re willing to entertain the possibility that this is a shakeout; however, for the bulls to avoid another down leg to the 1018 to 1025 support area, they will need to assert control early today.  As far as the Fed’s Treasury purchases yesterday, they amounted to an above average $3.5 billion, but there was no immediate or delayed effect with respect to equities.  Until more data is generated, there is no pattern to trade.

The Euro is down about 1% against both the US Dollar and Yen, also down again against the Swiss Franc.  We were looking for a close in 10 Year T-Note futures below 125’15 to confirm a top.  Instead, they have…

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The Precise Take – Equity futures maintaining after disappointing Jobless Claims

Big Picture Analysis:  Despite two consecutive selloffs on the close, action on the daily chart for the major indices looks relatively benign.  With opex tomorrow, we shouldn’t read too much into any extreme intraday moves as long as the 1070 to 1100 range is respected on a closing basis.  In fact, a swift down turn to the low 1070′s to scare out the weak longs looks increasingly probable.  The Fed will also be purchasing another $2 to 3 billion in Treasurys today.  Whether it will be as supportive of equities as it was the first half of Tuesday remains to be seen, but the potential for volatility remains as there will be two economic reports released just prior at 10:00 am.  10 Year T-Note futures appear to have started their decline, though the overnight weakness was reversed sharply on the Jobless report.  A close below 125’15 (basis Sep 10) suggests an interim top, which would be supportive of equities on any future sharp down moves–but not necessarily so on…

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The Precise Take – Equities consolidating yesterday’s gains ahead of opex Friday

Big Picture Analysis:  The Federal Reserve Bank of New York conducted its first Treasury permanent open market operation (POMO) yesterday–the first such since October, 2009.  Long time readers will recall that there was a strong correlation between POMO days and paint the tape closes in the second and third quarters of 2009.  Yesterday was nearly the reverse, as equities rallied throughout the morning auction and shortly thereafter, but sagged on the close.  A sample size of 1 a trend does not make, but it to seemed to be a blatant risk-supportive signal.  Also noteworthy was the large decline in 10 Year T-Note futures, suggesting that their recent parabolic rise could have been mere front-running of the Fed–financial institutions bidding up coupon Treasurys in anticipation of selling them at a profit back to the Fed.  The amount of Fed purchases ($18 billion for the first month) is a bit less than 2009, so it remains to be seen if the 2009 effect can be duplicated.  It’s also possible the money will be directed…

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Big Picture Analysis:  After an early move down on yesterday’s open to the 50% retracement of the July rally, the ES is up solidly overnight just below major resistance, which extends up to 1091.25.  Any venture above this level will need to be quickly reversed or weak shorts will start covering.  50% retracements have been powerful over the summer, so 1097.00 should be watched.  However, at that level, there should be enough momentum  to get to the ~1105 area.  A failure below 1091 indicates sellers have remained firmly in control and another down leg should commence.  With no major news for the rest of the week, focus now shifts to…

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Big Picture Analysis:  Below, we see the ES has been in a trading range since late last week bounded by the blue and green value areas, from approximately 1070 to 1090.  Acceptance outside this range should kick off the next short term move.

Leaders Analysis:  The 10 Year yield has gapped down to the lower end of a support band that runs from 2.62% to 2.65%.  While we have been expecting a reversal starting as late as tomorrow, the overnight move suggests there may be fuel for continuation of the down trend.  The Euro is weaker only marginally against the Yen, but it is more so against the Swiss Franc, which could be an indication of…

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Big Picture Analysis:  CPI and Retail Sales were within consensus this morning and have not moved the markets much.  Next week is quiet on the news front, with a few housing reports, along with TIC and PPI, on Monday and Tuesday.  Then, nothing major for the remainder of the week.  Short sellers should reappear on a move to 1090-93 in the ES or below 1070.00–in between is, thus, neutral.

Leaders Analysis:  Long term Treasury futures appear overbought and look ready to spike down on the first news that would support such a move.  TIC or PPI could do so.  Tuesday is also the Fed’s first Treasury purchase since the program ceased last year.  The amount will probably be about $2 billion, and it’s worth noting that…

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Big Picture Analysis:  The equities indexes plowed through many support levels yesterday and overnight, which is probably the death knell for the rally.  In retrospect, the signs of institutional participation and high breadth were probably a result of record high correlation in the stock universe.  Going forward, we will tend to discount such information until the correlation lowers to normal levels.  Tomorrow, CPI and Retail Sales will be released before the open, with Consumer Sentiment 25 minutes after, which could make for a volatile end of week. The 1018-25 support area sits far below and is the next major target for the strong shorts.  It will probably take a close above 1105.00 to get them to cover.

Leaders Analysis:  Just as the EuroYen plummeted yesterday, the US Dollar Index rallied, and is up again overnight, with the 84.00 level a likely target into next week.  After more downside yesterday in the 10 Year Yield, it is nearly to strong support.  The rally in the 10 Year Note futures (inverse to yield) is likely overdone, and now that the QE Lite rumor is a reality…

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The Precise Take – ES down to critical support

Big Picture Analysis:  We mentioned the August trading range yesterday, which has seen both sides since the FOMC Announcement yesterday.  The ES is now trading just below what we considered critical support at 1103.50, and a close below this level will damage the rally.  If 1191.75 is taken out, odds favor a retest of the July lows.  Regarding the FOMC Announcement yesterday, the Fed’s portfolio has been steadily shrinking as a result of principal payments on mortgage backed securities.  It will now take its MBS and Agency cash flows and buy 2 to 10 Year Treasurys.  Based on current interest rates, our math suggests this will be $176.9 billion over the next year or $14.7 billion per month.  It remains to be seen if this will have the same equities ramping effect as it did in 2009, but we’ll keep a keen eye on the first few auction dates.

Leaders Analysis:  Equities finally caught up with the plunging yield on long term Treasurys, as the latter is now at 2.72%.  There is still a bit to go until 2.65% support is reached, and at that point there could be a slight relief rally.  The US Dollar Index broke through trendline resistance to reach its 20 day moving average at 81.75, and has backed off a bit since doing so.  The EuroYen and AussieYen are both down big (though to support) after consolidating ahead of FOMC day.  For today, it looks like…

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Big Picture Analysis:  August has been in a trading range that should break soon, and by Friday at the latest.  There are still strong signs of institutional support, so our bias is bullish, but a close below 1103.50 would probably turn us bearish.

Leaders Analysis:  The 10 Year Yield is down marginally overnight, but we won’t read into to it until this afternoon’s news is digested.  The US Dollar is the big mover overnight, up against all the major crosses, with the Index up to trendline resistance.  If it backs off from 81.34 to 81.44 resistance, it should be supportive of equities, and if it powers through, look for more equities weakness.

Trading Today:  Today should gap down materially, which is rare on FOMC day.  In fact, the last such instance was September 18, 2008, and before that, September 24, 2002, then August 13, 2002.  The sample size is small, but for what it’s worth…

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Big Picture Analysis:  After Friday’s late recovery and overnight continuation, the ES finds itself back to the 1125-30 resistance band.  With bullish FOMC seasonality kicking in at the close today, there is a very good chance it will finally break through by tomorrow afternoon.  The markets have priced in a slight easing, and should get it tomorrow.  Later in the week, Retail Sales and CPI on Friday will be the focus. 1103.50 has become major support, so if the ES does head down again, it needs to hold or we’ll probably see the strong swing longs exit.

Leaders Analysis:  10 Year Treasury futures continue to attract money and rally, yet costing the equities rally virtually nothing.  To expand on what we wrote Friday, the correlation between equities and the yield (inverse to the futures price) is only loosely positively correlated; however, large moves in the yield are…

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