Pre-open eMini SP 500 Morning Report 1.6.10

This is a guest post from Precision Capital Management

The Precise Take – ES exhibiting strength ahead of employment numbers

Leaders Analysis:   30 Year T-Bonds advanced exactly to trend line resistance and have retreated from it overnight.  They still look poised to break to the upside, however, which would be just in time to lower longer term rates ahead of next week’s 3, 10 and 30 year auctions.  The US Dollar Index closed on its highs yesterday after rejecting support.  Overnight it advanced and backed off, now trading in the middle of its one week range.  The EuroYen had a strong down day yesterday, but has recovered much of the loss overnight.  It looks like it wants to consolidate around its 200 day moving average, so we will look for a breakout of T-Bonds or the Dollar as the most likely to give a good equities signal.  All in all, still equities neutral. 

Medium Term Analysis:  Things should remain relatively quiet ahead of Friday’s Employment Situation, but the ES closed very strongly yesterday, so more upside action is possible.  Next week is quiet until Thursday’s Retail Sales and Friday’s CPI.  These will be big market movers given the importance of December’s sales numbers (making or breaking many retailers) and the sensitivity to interest rates now.  Shortly after, earnings season begins.  We are in the phase of the rally that began in 2009 where very bullish news boosts the US Dollar, which restricts equities gains.  Accordingly, consensus numbers are more conducive to rally continuation.  It will be important to watch reactions to bearish news to see how much is discounted.

Trading Today:  It looks like the ES will open around yesterday’s settlement, so an early test is possible of…

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