Your MUST-READ Morning Stock Futures Cheat Sheet: Long term prospects improving

The exclusive Markets Morning Report is supplied by The Precision Report.

The Precise Take – Long term prospects improving

Big Picture AnalysisPrice action over the last two sessions has been constructive for the bulls, as the rally has now survived its first consolidation, which was the death knell for previous rallies since August.  US equities are moving less on headline risk and more off earnings and scheduled economic reports, which is what one wants to see to support the bullish case.  The declining 200 day moving average in the ES looms just above at 1262, and many have noted the ominous similarity in the chart pattern in the S&P 500, where the present would coincide with May 2008.  At the time, price rallied to the 200 DMA and sold off sharply to new lows in the months to follow.  We must note a major difference between now and that era: namely, in 2008, the Federal Reserve had just begun to aggressively sell several hundred billions of its Treasury holdings to sterilize some of its other operations, including its loan to Maiden Lane.  As a result, money supply growth in the US was contracting, in stark contrast to the present, as we wrote a few weeks ago.  Additionally, rumors over the last two days suggest the Fed will step in with a new round of large scale asset purchases of MBS securities at one of its next meetings.  Not to say that things cannot deteriorate overnight in Europe, as sentiment can and does indeed flip on a dime in bear market rallies, but it seems a leveraged EFSF and an ECB rate cut next week are being priced in.  If the appearance of a long term solution emerges in Europe in the coming weeks, we can indeed imagine a scenario where risk markets rally much farther than is commonly acknowledged, with a test of at least 1350.  If brinkmanship continues and the potential for defaults beyond Greece (which is priced in) becomes an issue, the markets could indeed replay 2008.  Short term, we would not be surprised to see some sideways to down action over the next few days, as the markets are a bit overbought and the Treasury auctions into Thursday provide a bit of bearish seasonality.  If traders overcome the 200 DMA, then 1285 is next major resistance.  To the downside, 1225-30 is first major support, but critical support for the bulls on any retracement is 1185-90.  Consumer Confidence today is often a market mover.  Durable Goods tomorrow and GDP on Thursday are the major reports of the week.

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Today’s  Scheduled News (all times EDT)

Major Market Movers
S&P Case Shiller  HPI at 9:00 am
Consumer Confidence at 10:00 am

Minor Market Movers
State St. Investor Confidence at 10:00 am
2 Yr Note Auction at 1:00 pm

Tomorrow’s Scheduled News

Major Market Movers
Durable Goods at 8:30 am
New Home Sales at 10:00 am

Minor Market Movers
EIA Petroleum Stats at 10:30 am
5 Yr Note Auction at 1:00 pm