The S&P futures are continuing their sideways movements as mixed economic data points negate each other. While yesterday's Prelim GDP outpaced analyst expectations, weekly Unemployment Claims are floating back towards 600k and America's employment market doesn't seem to be improving. Furthermore, today's slightly better than expected U of M Consumer Confidence number was countered by weak personal spending data. Hence, unemployment remains abnormally high, creating a strain on consumption. However, a depreciating Dollar is leading a recovery in demand for U.S. exports and manufactured goods while government programs boost GDP. Additionally, corporate earnings from technology companies continue to impress as both Dell and Intel revealed their respective earnings outlooks are looking up. The positive spots of economic recovery and growth are strong enough to keep the S&P futures comfortably above their highly psychological 1000 level. However, global economic developments are testing the patience of investor uncertainty.
The SCI dropped another 3% today after China announced it is following through on its plan to tighten liquidity in order to try and deflate the asset bubbles popping up in equity and real-estate markets. The government's decision to cool down their economy is worrying investors since China has been the engine of growth in the global economic recovery. Additionally, economic data this week from Britain has been mixed and disconcerting. Despite the slightly better than expected GDP number, Britain's consumer confidence is lagging behind the economy's fundamental improvements. These disconcerting economic developments are preventing the S&P futures from taking off, and the futures are instead forming a thin consolidative pattern.
Despite present consolidation, we expect volatility could pick up next week. We will receive more key data from the U.S., Japan, China and Britain. Japan will kick off the week with several indicators and investors will focus in on China's Manufacturing PMI number late Monday. If China's economy really is cooling off then the S&P futures may be inclined to pullback, and vice versa. However, if declining Japanese exports to China are any indicator, China's upcoming economic data may be miss analyst expectations by a slim margin. The U.S. will join the party on Tuesday by releasing ISM Manufacturing PMI and Pending Home Sales data. Hence, rising volatility appears to be in the cards. On the other hand, mixed data may just lead to more consolidation as investors opt to enjoy the summer.
Although movements in the S&P futures have been limited, we recognize encouraging gains in the EUR/USD, GBP/USD, and gold. Meanwhile, crude futures are holding up well above their psychological $70/bbl mark. Hence, the S&P's correlations are green and creating a positive environment for bulls. As a result, if next week's economic data impresses the S&P's correlations are in position to support a substantial breakout to the topside. However, data has been coming in mixed, so uncertainty is present.
Resistances: 1026.25, 1032.75, 1038
Supports: 1020.75, 1018, 1010.75, 1004