Pre-open eMini SP 500 Morning Report 2.2.10

This is a guest post from Precision Capital Management

The Precise Take – Equities mounting the first signs of recovery, but shorts are emboldened

Leaders Analysis:  Both gold and the EuroYen rallied throughout yesterday and closed higher than any day of the previous week, with marginal moves up overnight.  30 Year T-Bond futures slid after hitting resistance yesterday and the US Dollar Index has traded down to nearly the weekly pivot overnight.  There is further room for the moves in the Dollar, EuroYen and gold to continue, so the leaders are equities bullish.

Medium Term Analysis:  Yesterday nearly fit one of our two criteria for what would end the selloff, as there was a range day in the ES that nearly closed over daily R1, with a strong rally into the close.  In fact, the ES never traded materially below VWAP.  The bad news for longs is that sentiment has shifted from a buy-the-dips to a sell-the-rally mentality.  Not until 1109 is cleared does the ES have a chance to revisit the higher end of the January range.  The BLS stated in its October Employment Situation report that it would make an annual benchmark adjustment in the February 5 report of minus 824,000 (for the worse).  It’s possible it will find a way to spin or avoid this, but it’s difficult to see how equities will rally this Friday on this relatively unknown news.  If they can, that is indeed very bullish.

Trading Today:  The lower end of the projected range today contains day-session-only S1, the weekly pivot, the combined session pivot and closing VWAP, from 1079.50 to 1080.25.  If this area does not hold, we expect a return to test Friday’s low.  We would also consider a long from…

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