The S&P futures have moved back above their highly psychological 1100 level as investors make a return to the risk trade. The Dollar is experiencing broad-based weakness while gold looks to test its own psychological $1200/oz level. Meanwhile, crude futures are edging higher while aiming for their highly psychological $80/bbl level. In other words, the S&P futures are benefitting from the strength of its positive correlations. Today's preference for the risk trade stems from encouraging manufacturing data from China combined with the RBA's decision to increase its benchmark rate by 25 basis points. China's PMI numbers relieve some of the uncertainty surrounding the performance of emerging markets following Dubai's debt problems. Furthermore, the RBA's 25 basis point increase, though expected, gives the central bank's vote of confidence concerning the state of the global economic recovery.
In addition to news from Australia and China, the BoJ held an emergency monetary policy meeting to alleviate concerns of an appreciating Yen. However, the BoJ's decision to supply 10 trillion Yen worth of loans at the benchmark rate to Japanese commercial banks hasn't had its desired impact on the currency as the USD/JPY trades back around Monday's levels. Hence, there remains a disconcerting downward pressure on the currency pair. Moving across the Pacific, the U.S. released a soft Manufacturing Production PMI and this number may be taking a bit of momentum out of today's pre-market rally in the S&P futures. In addition to the PMI figure, the U.S. released yet another encouraging Pending Home Sales number, indicating the U.S. housing market is holding up rather well in comparison to crisis levels. In all, the mixed data from the U.S. seems to be overshadowed by the positive developments in China and Australia. Therefore, it seems a declining Dollar is driving equities higher. That being said, investors should eye the EUR/USD's interaction with our 3rd tier downtrend line and November highs should they be tested, for a topside breakout could send the S&P futures higher. Additionally, investors should monitor gold's behavior around $1200/oz since the precious metal is normally negatively correlated with the Greenback.
Technically speaking, the S&P futures face topside barriers in the form of the psychological 1100 level and 11/25 highs. The futures have moved back above our 1st tier uptrend line, a positive technical development. As for the downside, the S&P has 11/30 and 11/27 lows serving as technical cushions along with the psychological 1100 and 1075 levels.
The U.S. will release more key data points tomorrow, including its ADP Non-Farm Employment Change coupled with the publishing of the Fed's Beige Book. Should tomorrow's ADP number echo last week's movement below 500k in Unemployment Claims in addition to a more positive Beige Book, the S&P futures could experience a nice immediate-term pop.
Resistances: 1109.75, 1113.25
Supports: 1100.75, 1096, 1089, 1083.75, 1075.75, 1071.5, 1067
Psychological: 1100, 1075,November Highs and Lows