Pre-open eMini SP 500 Morning Report 1.19.10

This is a guest post from Precision Capital Management

The Precise Take – Equity longs attempting to defend lower end of trading range

Leaders Analysis:  30 Year T-Bond futures are down marginally overnight after stalling at moving average resistance since last Thursday.  The US Dollar Index is stronger overnight, with the EuroYen correspondingly weaker.  However, they are both at interim levels where they could reverse or stall.  This makes the leaders overall only mildly bearish.

Medium Term Analysis:  As shown in the chart below, overnight, the ES tested 1126.25, below which there is no volume support.  However, it has rejected it soundly with the ES rallying six points as we write.  This indicates that longs are buying the lower end of the trading range, which is roughly 1126 to 1148.  If it gives, the next downside target is the 1109.00 high volume level.  However, if the ES can break up through the downward trend channel, it should be able to test the upper end of the range again.  There are several housing related reports this week, but no top tier news items, so the focus will be on earnings.  Next week features an FOMC Announcement on Wednesday and GDP for Q4 2010 on Friday, the last trading day of the month.  It’s worth noting that expectations are becoming more bullish for this preliminary estimate (which will likely be revised materially in the coming months), with some estimates north of 5%.  We expect the markets to chop around over the next week; however, January should end with volatility.

Trading Today:   The lower end of the projected range is the overnight low of 1126.25 to Friday’s low of 1127.50.  Shorts will defend the upper end that extends from 1134.25 to 1137.00 and which includes today’s value area.  However, there is a good chance that…

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http://www.precisioncapmgt.com/wp-content/uploads/Precision_Report_January_19_10.pdf