The S&P futures are consolidating beneath their highly psychological 1100 level again after recovering nicely from Friday lows. Thus far, it seems that the Dubai debt issue may have been priced into U.S. equities barring another negative shock or side-effect from the matter. However, the situation in Dubai has dented investor confidence, and concern is rising that similar negative developments may occur in other emerging economies. Therefore, the rally we saw taking off on Wednesday has been effectively countered, and the risk trade may need a positive wave of economic data releases and central bank rate decisions this week in order to regain its upward momentum. Speaking of which, China will release its Manufacturing PMI data late Monday EST followed by the RBA's monetary policy decision. The combination of positive China data and a dovish RBA statement could help mitigate the negative psychological blow dealt by Dubai. However, negative Chinese data coupled with a neutral or cautious RBA could reignite the downturn we witnessed on Friday.
In addition to the news events later tonight, the U.S. will release Manufacturing PMI data of its own tomorrow along with the UK's Manufacturing PMI and HPI data points. Therefore, investors should get a good sense of where manufacturing stands and how the global economic recovery is holding up. Today's Chicago PMI printed above analyst expectations, setting a positive stage for tomorrow's release. In addition to America's Manufacturing PMI number, investors will also receive Pending Home Sales and analysts expect the figure to turn negative by -0.4%. In all, data releases combined with the RBA's monetary meeting could yield a volatile 24 hours in the markets. Considering investor psychology has been wounded by the Dubai news, additional weight may be placed on upcoming data points.
Although last week's data set was a bit mixed, we saw some very encouraging developments. Most notably, weekly unemployment claims finally fell below the psychological 500k level. Therefore, the U.S. employment market may have taken another big turn for the positive. However, purchases of durable goods were surprisingly weak, indicating consumption remains a sore spot in the U.S. economy. On the other hand, should unemployment continue to improve, consumption may rise as well. Therefore, this week's upcoming U.S. econ data should help fill out the picture in terms of where unemployment, production, and housing stand at the moment.
Technically speaking, the S&P futures face topside barriers in the form of the psychological 1100 level and 11/25 highs. A positive development for the S&P would be to hop back above our 1st tier uptrend line since it runs through previous November lows, or the 1025 area. As for the downside, the S&P has 10/22 and 11/27 lows serving as technical cushions along with the psychological 1075 and 1050 levels.
Resistances: 1089.50, 1093, 1097, 1102.5, 1109.75
Supports: 1083.75, 1075.75, 1071.5, 1067, 1062.75, 1056.75
Psychological: 1075, 1100, 1050, November Highs and Lows