Pre-open eMini SP 500 Morning Report 5.7.10

This is a guest post from Precision Capital Management

The Precise Take – Markets attempting to consolidate after market meltdown

Big Picture Analysis:  A perfect storm of political unrest, currency mistrust and algos gone wild converged upon the markets yesterday.  Fortunately, there were warning signs to which we will be alertly tuned.  Liquidity was suspect yesterday morning, virtually non-existent yesterday afternoon, and improved only marginally overnight.  Extreme caution is still warranted.  We took an extensive look at 80 years of market data and came to no technical conclusions.  Looking at the fundamentals, this does have the makings of another Lehman-type meltdown and, unless confidence is restored quickly (as in next week—preferably over the weekend), risk of further selloff remains.  What could hold the market up for a few days is that virtually all stops were wiped out yesterday and the close was relatively strong, which should limit margin calls.  Our line in the sand that needs to hold now is…

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