Wow. Interesting stuff going on today. There is a huge bid interest in the 10s and the Euro is in rally mode simultaneously. Certainly not cut and dried there from a correlative perspective in the ES. The retail number was weak with the extraction of the strong auto numbers last month and there was a bit of initial reaction but then the overall number was positive. It did cause a bit of a slide but not enough to break through the OL. Also of note on the pre-market test there was no short interest from big lot traders. In fact, they have been buying the lows all morning. Overnight volume is still steady and moving into heavy territory but it is fairly mixed with a slight list to the short side. However as I said large traders are not quite so short in the last half hour. Yesterday we broke through what most thought was interim support around the 57-58 handle and now all eyes are on 40-41. If it doesn’t hold that is a really bad sign for the equity markets and may be the start of a sustained multi-day sell-off. I don’t think that will happen though. My sense is maybe we break through the OL finally and test 40-41 at some point but I think as long as we get no additional bad news it holds. We will look to probably scalp the OL although if we see the big lots buying again we may take a full rotation. Otherwise we will wait to fade 40-41long. If it really flushes we would maybe sell 40 into 36-37 but not beyond there. As far as long fading down there it would be tough and we would just have to feel it out but we will limit the looking for a bounce to around 35 and 31-32. On the other side we like fading 50.25 short on good order flow and there is a scalp (but not a full trade) op around 54.50 for a short. There is also a potential long above 52 into the 54 or 55 handles. If we do test the OH we think it will probably hold. If it doesn’t we might buy beyond 62 into the big cluster from yesterday around the daily R1. Volume deltas are really riding the fence this morning but the large traders are slightly long favored which continues to grow. We will again watch the VIX closely to see if it comes off at all, but I doubt it. It will be interesting to see what happens in the cash and options markets today as it relates to the capital pouring into the 10 year. Expect lots of volatility today. Days like this provide lots of big swings around key levels which can either be a fade traders dream or worst nightmare. Be careful as always…