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Thursday's Market Outlook 5/6/2010

Bottom Line: More early pressure, but we think we’re headed for the bottom of a trading range and expect some relief.

A combination of signals and events lead us to believe we will hold in and stage a recovery rally. We’re not looking for new highs. We are basing this trading outlook on levels of extreme now being approached in fear, oversold reading and targets we see as a result of our EW analysis.

Make no mistake, we are bearish the equity markets. But the near-term indicators and signals we monitor tells us there’s a high probability this sell off will result in a move that takes us to the bottom of a near-term trading range. Once complete, a relief rally will unfold. If correct, we expect this will be the counter-trend bounce to sell into.

Our next targets for Crude is a move down to $77.64, the 10yr T-Note has reached our 1st target of 119^05, while we see the Dollar move up to $84.66.  We think this where you book in your profits if you can.