Pre-open eMini SP 500 Morning Report 5.11.10

This is a guest post from Precision Capital Management

The Precise Take – Markets doubting bailout effectiveness

Big Picture Analysis:  The 1161.75 high volume level was indeed the high yesterday, and the ES is down overnight, having traded as low as 1140.50.  It looks as though the coordinated bailout was not enough to allay fears, and we should see some additional selling into Friday.  If this occurs, we would expect to see value longs start testing the waters at around 1119.00, then 1108.00, then 1098.75.  If the ES rebounds from 1098.75 or above, that is a sign not too much damage was done last week, and the ensuing rally has a chance at testing the late April high.  Acceptance above 1161.75 negates the selloff into Friday scenario.

Leaders Analysis:  The EuroYen failed at moving average resistance yesterday and is down overnight.  In the 30 Year yield, the 200 day moving average, previously strong support, survived its first test of resistance yesterday.  The Euro gave back all its gains yesterday and is back in Friday’s range, and gold is impressively up challenging all time highs.  There’s probably some further upside for the US Dollar, but as the Fed’s inflationary Dollar swaps kick in, they should put pressure on it and we’ll be on alert for a top.  The leaders are equities bearish today.

Trading Today:  Liquidity is still an issue in the ES and the daily ranges are too wide for our method of predictive range analysis.  For what it’s worth, while the daily and weekly pivots are not yet working well right now, the monthly pivots and high volume levels are, and these are the basis for the support levels in the first paragraph.