ES review & plan
Yesterday I mentioned that I wanted to see support in the bond market after the big sell-off to stop the weakness in the ES and to not want to sell rallies. We got that in spades with a 3 point bounce off the lows in ZB yesterday at the same time the German Bund went through a potential selling climax with yields spiking dramatically, before big buyers stepped up to support it and rally it hard. If we see the bond markets stabilise and rally further, this is supportive to stocks.
The daily chart shows the attempted break down through the lower trend channel has been, temporarily at least, halted. Volume overnight yesterday was above average with increased activity in the European session due to the strong sell-off there.
Yesterday opened just below the prior settlement and ranged inside the prior value area early on. Once there was acceptance above the overnight high buyers pressed the shorts to cover above the 2084.00 pullback high from Wednesday. Internals were not strong, however, and cumulative delta remained negative all day. The afternoon pullback to 2080.50 found it's way back to the wide POC to settle. Value was left overlapping higher, the high left was poor and there remain single prints from Wednesday to test.
Overnight the bond market continued to rally and the ES range is 2084.00-91.25 versus settlement at 2084.25. The employment report at 7.30am ct is the usual main event and key driver for today. The lower than expected ADP number yesterday is a clue we may see NFP at the low end of estimates. Any signs of employment weakness is going to push back rate increase expectations temporarily and probably see a rally in bonds and stocks, and vice-versa. I'm using the support and resistance zones in context of the market reaction and internals.