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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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This is a guest post from Precision Capital Management

The Precise Take – Equities still consolidating near highs

Leaders Analysis:  The leaders are mostly quiet overnight, and are equities neutral.  Focus will remain on the US Dollar Index’s consolidating wedge. 

Medium Term Analysis:  Yesterday, the ES tested to the tick the January 1148.00 high.  If we were to compare the current rally to that of July 2009, yesterday would be Tuesday, July 21 and today would be the July 22 inside day, with tomorrow the strong break up through resistance.  We note this because of…

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This is a guest post from Precision Capital Management

The Precise Take – Markets quiet as the S&P 500 tests the January high

Leaders Analysis:  30 Year T-Bond futures are down to moving average support, and the US Dollar Index is mostly flat.  The 10 Year Treasury auction is today and the 30 Year tomorrow, so long term rates will be reactionary instead of predictive.  The EuroYen and gold are slightly bullish, so the leaders for today are slightly equities bullish.

Medium Term Analysis:  The ES is accepting near the January high.  We remain bullish this week, but it’s difficult to predict when and how the breakout will occur.  If there is a retracement, any venture below the current value area that extends down to 1126.50 should be met with…

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This is a guest post from Precision Capital Management

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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http://www.precisioncapmgt.com/wp-content/uploads/Precision_Report_March_9_10.pdf

This is a guest post from Precision Capital Management

The Precise Take – Markets quiet ahead of slow news week

Leaders Analysis:  The divergences in leaders correlation that we noted shortly after the report Friday was quickly resolved intraday.  The US Dollar retraced all of its early gains and closed on its low, and is down further overnight.  The EuroYen finally got the breakout we were looking for and is up nominally overnight.  The 30 Year T-Bond yield broke above its long term trendline but, with the futures having traded down to support, may continue to oscillate around the trendline.  Until it breaks definitively away from it, this market will not provide much predictive value.  The leaders look as though they will consolidate their moves and are, therefore, equities neutral.

Medium Term Analysis:  On Friday, equities showed great strength and should be able to capitalize by extending gains this week.  The ES is within striking distance of the January 11 high of 1148.00 which, interestingly, was posted the day after the month’s Employment Situation report.  The fact that market internals calculated by a variety of methods are making new highs suggests they should avoid a similar fate this time.  If not, there should at least be warning.  Having said all that, there is not scheduled news of note over the next two days, and little else until Friday.  It would be normal in this situation to see a…

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http://www.precisioncapmgt.com/wp-content/uploads/Precision_Report_March_8_10.pdf

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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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http://www.precisioncapmgt.com/wp-content/uploads/Precision_Report_March_5_10.pdf

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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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http://www.precisioncapmgt.com/wp-content/uploads/Precision_Report_March_4_10.pdf

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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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http://www.precisioncapmgt.com/wp-content/uploads/Precision_Report_March_3_10.pdf

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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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http://www.precisioncapmgt.com/wp-content/uploads/Precision_Report_March_1_10.pdf