As mentioned in yesterday’s note, the move higher towards the all time high needed strength and momentum or we could see a short squeeze and false breakout. We got the breakout above the 40-42.50 zone but there was no follow through or sustained momentum. After bouncing between the two zones for much of the day, the break lower was sharp, trapping longs, and left single prints and a double distribution on the day (testing the overnight low in the last half hour), along with a selling tail off the highs.
The fact that ES had held up for so long was surprising as the bond market had taken a pounding, with a breakout higher in yields across the curve after stronger than expect ADP payrolls numbers.
Overnight so far markets globally have sold off, with ES range at 2913.25-2931.75, versus settle at 2931.50. Volume has continued to be heavy in the 10 year, with the cash yield around 3.22% currently. Whether this continues today, ahead of tomorrow’s employment report, remains to be seen.
I’m cautious about getting too bearish until we see acceptance below the 2907-08 zone, as mentioned earlier this week. Clearly, a move higher that fails to move back inside yesterday’s range is bearish but acceptance back inside the range could squeeze shorts.
Zones of interest for today below (showing yesterday’s RTH and the overnight profiles):