Mixed bag this morning, but before I say anything I will say that you always need to remember extremely narrow overnight ranges relative to current volatility generally means the OH and OL will be weaker than usual. The reason for the narrow range is relatively obvious. The ray of hope in the jobs market has created some nice rally activity but the market is still in the pattern of knee-jerk news reacting due to the lack of options for flight to quality. As expected Gold came off in the rally but there is still no haven in the 10 or 30 year because they just aren’t paying enough for the risk. Investors would almost rather take their chances in equities if they can’t beat the rate of inflation. IMO this rally will subside though due to some changes in the currencies. The EUR has rolled over and is selling hard ahead of the cash open plus we have the double whammy of the JPY falling as well. This, coupled with the carry cross starting to slide along with a bit of a bid returning to the bonds is creating a perfect storm of negative bias and no news to hold it up. In addition, market structure is such that the interim support which has developed around the 57-58 handle is likely to be tested for strength. Similarly, the OH is weak and if we do see a rally for some reason there is major resistance overhead beginning in the low 70s. Either way we should have some good rotational opportunities today and I expect volatility to remain a bit lower as it came off into the close yesterday. As always, watch your sectors and correlated markets for hard trending activity to keep from catching falling knives or blasting rockets. Also, be sure to err on the outer edges of low volume ranges in these conditions as the narrow range and low volatility will magnify the market’s need to probe for supply limits. It may be a waiting game at key levels today. I expect volume to be light with position traders standing pat into the weekend. My guess is we don’t trade beyond a high in the mid 70s or a low in the mid 50s today if that. We may just test one side and if I had to guess it would be the short side. I do think a test of support in the mid to high 50s will hold though – at least for today.
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