Wednesday, July 22, 2009

Morning Briefing for July 22nd: Back in Yesterday's Range

Following weak bank earnings reports, we have moved back into yesterday morning's range in the ES futures. That gives us yesterday's low and the overnight high as important reference points with respect to range trading and possible breakouts. If you didn't see the earlier post, note the expectations for consolidation, as the rally has been losing momentum on falling volatility. If, indeed, that consolidation is to take hold starting today, we should remain below the low 950 level from which the market made its recent drop on the earnings news.

Staying below that 950 area would frame yesterday's lows as an initial target in such a consolidation move. Note that such a move would roughly correspond to a move to the S1 level, as posted via Twitter this AM. I see we're set for a meaningful drop in XLF at the open, given the bank news. That sector will be worth following to see if it continues to lead to the downside. Note also the weakening of oil and gold prices, as the dollar has strengthened off recent lows. Those themes are also on the radar.

Watch for intraday blog updates and tweets as the day unfolds; good trading!