Pre-open eMini SP 500 Morning Report 2.5.10

This is a guest post from Precision Capital Management

The Precise Take – Equities trying to hold on after mixed Employment Situation report

Leaders Analysis:  The US Dollar Index has been on a tear and came within one cent of our 80.44 to 80.54 target overnight, from which it has backed off a bit.  If it is going to take a breather, this would be the level from which to do so.  Correspondingly, the EuroYen had its biggest down day since July and has bounced from strong long term pivot support.  10 Year T-Note futures have broken through resistance, but 30 Year T-Bonds have not been able to push through.  Despite the strong equities bearish movements over the past two days, given the overbought/sold status of the Dollar and EuroYen at strong support/resistance, the leaders are equities neutral.

Medium Term Analysis:  The headline numbers for the Employment Situation came in with a better than expected unemployment rate of 9.7% (best since August), with a monthly drop of 20,000 payrolls, which is toward the lower end of expectations.  It looks like the report will be spun as bullish.  After yesterday, bearish sentiment has taken hold strongly and any rallies will be met with both long liquidation and strong shorting.  A major hedge fund created to take advantage of the unique opportunities presented in late 2008 announce it would close recently, stating that the easy money had been made.  Accordingly, the general profit taking in the markets can fuel a more substantial correction in equities in the coming weeks.

Trading Today:  As we write, the ES has rallied ten points after hitting day-session-only S1 on the report.  As it is now trading above yesterday’s close, we must keep in mind the possibility that this is a false rally that will be reversed after the open.  What mitigates this possibility, however, is…

Read the full report: