Pre-open eMini SP 500 Morning Report 5.10.10
This is a guest post from Precision Capital Management
The Precise Take – Has the can been successfully kicked?
Big Picture Analysis: Over the weekend, incredible stopgap measures were introduced by the Fed, ECB, BOE, BOJ and others to halt the erosion of confidence. Make no mistake, this is money printing to the extreme and the risk markets have thanked the central bankers in kind. Friday was an inside day, albeit a 40+ point inside day, and the ES is up another 40 points overnight, having nearly reached the breakdown zone from last Wednesday and Thursday. From a market profile perspective, it has rejected, ever so slightly, its largest high volume level at 1161.25. If it accepts above, it has a shot at testing contract highs at the ~1215 level and possibly exceeding. If it sells off from here, it will mean that the best efforts of the central bankers have failed and we can expect another post-Lehman style meltdown. Accordingly, the markets are at another historical inflection point, and while it might seem a bit vain to reduce the possibilities to a single number in the ES, 1161.25 is the level to watch. Liquidity is a double edged sword. A lack thereof makes the markets easy to push around, but also makes them subject to bouts of magnificent failure as we saw last Thursday. The more traditional measures of intraday support and resistance are not working well, so until things calm down, we will refrain from publishing the day trading guide.