Pre-open eMini SP 500 Morning Report 2.22.10

This is a guest post from Precision Capital Management

The Precise Take – Markets poised to consolidate after tumultuous week

Leaders Analysis:  The EuroYen forex cross was able to just barely close over its 20 day moving average Friday.  Overnight, it took out last week’s high but is trading down a bit.  The 50% retracement of the down leg that began in January at 127.53 is a realistic target this week.  The US Dollar Index has rejected the higher levels reached on last week’s Fed announcement and is back in the prior range of 79.56 to 80.75.  The 30 Year T-Bond yield is at strong resistance and is probably topping, but it could take several weeks to put in its characteristic rounded top, meaning T-Bond futures will probably chop around sideways in the meantime.  Gold made a new high overnight just short of the 50% retracement of the November high to the February low, and has backed off a bit.  For today, the leaders are equities neutral, but the Dollar and EuroYen look as though they will make an equities bullish move by Wednesday.

Medium Term Analysis:  Equity indexes are looking strong, especially after the inability of the shorts to regain control after the Fed announcement post-close Thursday.  While we would not be surprised to see a pullback to either the 1094 or 1083 level in the ES, the 1127 target has a good chance to be reached over the coming week.  We will be watching the US Dollar closely as it appears ripe for a correction of 38% to 50% of the rally that began in late November.  A strong down move would help either…

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