Pre-open eMini SP 500 Morning Report 12.29.09

This is a guest post from Precision Capital Management

The Precise Take – ES up again overnight

Leaders Analysis:   Overnight, the 13 Week T-Bill rate doubled, to 0.105%.  This could merely be part of end-of-year window dressing, with institutions creating demand for cash and short duration Treasuries.  So, we’ll need to wait until the new year to confirm before coming to any broader conclusions.  The 30 Year opened flat relative to yesterday but is still testing the June highs.  This is significant with two more important auctions on deck this week.  The US Dollar is down again overnight and, notably, the EuroYen has now advanced to its 50 day moving average resistance, with the 200 day just above.  It will be important to watch how it reacts to this resistance zone.

Medium Term Analysis:  The holiday pattern has held once again, with a small range during the day session and new highs overnight. How long can this continue?  It would be reasonable to speculate at least until the end of the year, Thursday.  However, with some of the leaders at important inflection points, it could occur sooner.  A major selloff is unlikely, but we should be prepared for the possibility that traders will be quick to book profits on this gift rally.

Trading Today:  Yesterday, we watched with interest as the 1126.25 50% retracement of the entire down move from the Oct 07 high was respected to the tick.  It was, however, blown out overnight, so it is reasonable to assume…

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