Your MUST-READ Morning Stock Futures Cheat Sheet: What a short covering rally looks like

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The Precise Take – What a short covering rally looks like

Big Picture Analysis:   After a slow start yesterday, late afternoon rumors from you-know-where fueled a move into the major resistance area we had been watching (1155-60 basis ES).  Overnight, once it gave way, it was an easy trek to just shy of 1180, the bottom of the prior breakdown area.  This has been the pattern since August: several days of consolidation followed by spectacular price breaks.  We had said yesterday that any bounce would need to be fast and furious to avoid the wrath of the bears.  So far, that is what we have seen, but a multi-day stall in the upper end of the current trading range will likely resolve in favor of the bears.  The situation in Europe remains unresolved and clear leadership from US stocks has yet to emerge.  We’ve mentioned the July 2009 and September 2010 periods.  In the former, the new bull leg was led by the financials against the backdrop of QE1 and in the latter, we had the cloud computing story with hope for QE2.  What we have now are extremely oversold situations in US financials, and European and Asian bourses (with regard to the latter, see this story via TheTrader).  Cut short: if the ES accepts above 1180 and quickly launches higher, we could have a rally to the upper end of the major trend channel in the ES, about 1255.  At that point, we would need to reevaluate leadership to judge further potential.  Conversely, a multi day stall between 1180 to [Update: 1210] emboldens the shorts.

Trading Today:   Below are marked the support and resistance areas.  Consumer Confidence at 10:00 am could be a market mover.

Today’s  Scheduled News (all times EDT)

Major Market Movers
Consumer Confidence at 10:00 am

Minor Market Movers
S&P Case Shiller HPI at 9:00 am
State St. Investor Confidence Idx 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

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


Click above images for larger charts.

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