Pre-open eMini SP 500 Morning Report 5.4.10

This is a guest post from Precision Capital Management

The Precise Take – ES consolidating as sovereign concerns continue

Leaders Analysis:  After breaking to the upside last week, US Dollar Index, in typical fashion, retraced a few days but has resumed the surge.  The first upside target of 83.04 is in sight, but major resistance is not until 83.34.  The 30 Year Treasury yield is in a tight downward channel, the lower end of which is now in confluence with the 200 day moving average at 4.46%.  This line caught the October low and a bounce would be expected.  However, there’s still a bit of room until that target is reached.  The EuroYen forex cross, as a proxy for global risk appetite, is still consolidating and is at minor support.  For today, the leaders are slightly equities bearish.

Medium Term Analysis:  After staging a morning and early afternoon rally yesterday, the ES stopped dead at 1202.00 resistance, selling off overnight.  The below chart illustrates the diamond pattern that the ES has formed.  As it is now at the lower end, it’s possible for another push to the upside around 1198 to 1199 while leaving the pattern intact.  A decisive breakout in either direction suggests follow through.  Our bias remains to the downside after Friday’s strong down day and a number of other factors, but we’ll let the market tell us what to…

Read the full report: