Pre-open eMini SP 500 Morning Report 1.5.10

This is a guest post from Precision Capital Management

The Precise Take – ES looking to consolidate Monday’s gains

Leaders Analysis:   The EuroYen forex cross took out the prior two days’ lows, but is using the 50 day moving average as support. The US Dollar is a bit lower, but has now entered the fib support area of 76.85 to 77.16 measured from its breakout of the 75.88 resistance level.  Our guess is it will likely bounce around in this support box, then rally again until at least the 79.00 area.  Less likely is a return to the 75.75 to 76.00 area.  When the Dollar rallied in December, equities were able to make gains, but they were more labored then when the Dollar was in freefall.  30 Year T-Bond futures have been consolidating and a break through 116 should facilitate a move to the 118 to 118’16 area.  With the 30 Year yield testing June highs, this is the more likely scenario, but a break higher in yields (lower in the futures) could make for another substantial move.  For today, the leaders are neutral.

Medium Term Analysis:  The ES has substantial pivot resistance from monthly R1 (1132.75) and weekly R2 (1135.00) overhead.  If it can break through, however, a move to monthly R2 at 1154.50 is in the cards.  If the ES flounders here, it will probably return to at least the 1116.00 to 1121.00 area.  If the US Dollar starts exhibiting strength again over the next few days, this is the more likely scenario.  If the Dollar makes a run for lower resistance, the 1154.50 target should be easily reached.

Trading Today:  There’s some scheduled news at 10:00 am, but surprises are unlikely, so we expect range bound action today.  As such, the lower end of the projected daily range is 1122.00 to 1124.00, which includes day-session-only S1, weekly R1 and the combined session pivot.  The upper end is combined session R1 and weekly R2.  However, we will also consider…

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