Pre-open eMini SP 500 Morning Report 5.5.10

This is a guest post from Precision Capital Management

The Precise Take – Equity futures down again overnight

Leaders Analysis:  The US Dollar Index traded up to the 83.34 target by the equities close and is up materially again overnight to the 61.8% retracement of the entire down move that commenced in March 2009.  While this is an important target, it probably has further to go as the Euro has a bit farther to fall to reach a major support cluster, from 1.2789 to 1.2832 (basis cash).  The gains continue for long term Treasurys as the yield (inverse to price) closed below its 200 day moving average and gapped down again overnight.  The EuroYen is below major support as well, so the leaders are equities bearish for today.

Medium Term Analysis:  It’s become relatively well known that buying after every major down day has been a remarkably profitable strategy since the February rally began.  Accordingly, when the crowd realizes it will not work, there should be another round of panic selling.  It isn’t necessarily the case it must happen today, but with the ES making a new low overnight, it is a possibility.  In a typical week, the Wednesday and Thursday ahead of the monthly Employment Situation report on Friday would be quiet, but…

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