Pre-open eMini SP 500 Morning Report 2.9.10

This is a guest post from Precision Capital Management

The Precise Take – Equities poised for rally attempt

Leaders Analysis:  The EuroYen rallied overnight, trading above its weekly pivot.  The US Dollar Index is down, but has not traded below its weekly pivot.  30 Year T-Bond futures are down as well after failing overnight at yesterday’s day session high.  The leaders are the most equities bullish since February 1, which was the first of a two day rally attempt.  That rally failed, but it looks like today will be another attempt.

Medium Term Analysis:  As we wrote yesterday, we have a quiet news week and the markets are sensitive to unscheduled news.  Overnight, equities are up on some bullish rumors regarding a Greek bailout.  Some have compared the situation to the Dubai events in late November that led to a quick selloff and rebound in world equities.  However, this situation is not to be taken lightly, as a Greek default would be three times as large as the Lehman bankruptcy, and could quickly devolve into another global crisis of confidence.  Accordingly, the markets are at the whim of the ECB.  If it bails out Greece, there will probably be a large short covering rally.  If it lets Greece default, there will probably be another selloff.  And, if it does nothing and Greece muddles through for the time being, there will probably be a series of minor rallies that lead to larger selloffs.  The moves generated by the first two scenarios will be very swift, so swing traders will need to be prepared to react just as quickly.  First critical resistance in the ES is 1080 to 1083.

Trading Today:  As we wrote above, equities look like they will attempt to rally today.  Barring surprise news, there is nothing scheduled that would facilitate a large move.  The lower end of the projected range is 1059.25 to 1062.75, which includes the day’s value area and the likely half gap.  However, we have confidence in it holding only for…

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