Pre-open eMini SP 500 Morning Report 5.13.10

This is a guest post from Precision Capital Management

The Precise Take – ES teetering on the edge of full recovery, but needs to show early strength

Big Picture Analysis:  Yesterday’s late afternoon surge took the ES above its 50 day moving average and further, up to 1174.75 overnight.  The cash closed just shy of its 50 day, so the first hour of trading today will be important to confirm yesterday’s strength.  Ideally, for the bull case, there will be a higher close today and 1160 will not be taken out to the downside.  If these conditions are not met, tomorrow’s (Friday’s) bearish seasonality could kick in and throw water on the recovery.  If they are met, there’s a good chance of a gap up Monday and an eventual test of the late April highs.

Leaders Analysis:  The EuroYen has so far formed a bearish engulfing candle, so we will be on alert for further weakness.  The US Dollar is higher, challenging the high reached last Thursday.  As this is strong resistance, it could very well reverse from here, but a breakout should garner momentum and weigh on equities.  Yesterday’s 10 Year Note auction was one of the best on record, and its yield, inverse to price, has managed to stay below its 200 day moving average even as the 30 year broke through yesterday, though ever so marginally.  Indeed, inflation expectations have been contained amidst the deflationary backdrop of the Eurozone crisis and last week’s market meltdown, such that…

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