Pre-open eMini SP 500 Morning Report 5.20.10

This is a guest post from Precision Capital Management

The Precise Take – Risk off

Big Picture Analysis:  Fecklessness and ad hoc stopgap measures have allowed public confidence to deteriorate to the point where everyone is in extreme defense mode.  The curious strength in the Euro yesterday was due to the Swiss National Bank devaluing its currency against the Euro to offset some €10 billion in depository capital that fled German banks after the short selling ban took effect yesterday.  Such is the law of unintended consequences.  We are likely now beyond the point at which a short covering rally will lead to real strength; however, we are soon due for a spectacular short covering rally.  The problem with prediction is that it will be news driven and prices can fall further until that news announcement is made.  However, we can say it will likely be in the form of a comprehensive coordinated package to address the bad sovereign debt held by European banks, and it will likely be made by Monday—possibly as soon as today.  Once the euphoria wears off, it will be time to…

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