Big knee-jerk reaction to the poor retail numbers. We knew we would get a boost from autos but when stripped out we really got hammered. All eyes on the sentiment number which will of course suffer at least a little on the retail weakness as sentiment is tied mostly to spending. Volume is still very light and we are going into a weekend as well. Despite the initial reaction though volume is still extremely light. It should stay that way as well as many institutional traders used the retail number as a profit taking op and going flat into the weekend. Overhead resistance is expected to be significant at 88-90 and it will take some continued strength to trade firmly above and ultimately test 1100. We still aren’t drawing much volume or interest as we approach the open and that will determine whether we have a wild ride from local scalping around key levels or not and whether or not that volatility we be tempered by any institutional paper trading. I’m thinking not unless we get new news or some really good sentiment developments. The Euro remains in a tight range after yesterday’s rally as did the 10s and 2s overnight. We did get a strong bid in the 10s and a nuclear one in the 2s on the reaction which doesn’t surprise me given the current yield picture. The carry trade has draw risk aversion interest as well which is quite significant so maybe we do see some follow through selling. As I write we have broken the news lows and are marching lower. Still, we do think there is reasonable strong support at the 67 handle and we have probably replaced the critical interim support at the 52 handle with 61-61. We are quite confident the 67 handle holds for at least a half rotation so if we can hold off testing until the open we should be able to work a favorable fade there. The big question is whether the volume will be able to withstand any significant position sizes this morning. Remember to stay out of the 9:55 news noise as it should be wild in these conditions and gets wilder the lighter the volume is.
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