The S&P futures have started off the session in the red in reaction to a combination of liquidity tightening measures in China and negative earnings from Alcoa. Alcoa earnings disappointed the street after the bell, beginning the earnings season on a downbeat. However, earnings season won't kick into full gear until next week. Therefore, this week's earnings stream may have a limited impact on equities. On the other hand, JPMorgan's earnings could move markets should the numbers surprise in either direction. Meanwhile, China made its second signal that it is serious about reigning in liquidity for fear of rampant inflation and excessive hot money being invested in speculative assets. China increased the required rate of reserves for banks by 50 basis points following an 8 basis point increase in the yield for 1-month bonds. Although these new monetary measures may not have too much of an immediate impact on the economy, further hawkish actions from China could slow global economic growth over the medium-term. For the time being, investors are digesting a larger than expected U.S. trade deficit. U.S. imports outpaced exports, a positive sign for U.S. Retail Sales due for release on Thursday. A strong Retail Sales report would be a welcome development for the S&P futures. Meanwhile, the Fed will release its Beige Book tomorrow in conjunction with the Federal Budget Balance. Fed officials have reiterated their preference for a loose monetary policy for the foreseeable future. Hence, investors may not receive much of a surprise from the Beige Book. Meanwhile, investors should monitor activity in the Dollar. The EUR/USD and GBP/USD are hovering around key psychological levels while our trend lines approach their respective inflection points. Hence, the FX markets could be headed for some volatility soon. That being said, another downturn in the Dollar could help push the S&P futures higher due to correlative forces.
Technically speaking, the S&P futures are riding along their medium-term uptrend as they create more separation from the highly psychological 1100 level. As for the topside, the S&P futures face technical barriers in the form of 2010 highs along with the psychological 1150 level. As for the downside, the S&P futures have multiple uptrend lines serving as technical cushions along with the 1/8, 1/7, 1/5 and 1/3 lows and highly psychological 1100 level should it be tested.
Resistances: 1137.75, 1140, 1143, 1148
Supports: 1133.25, 1130.75, 1127.25, 1124.5
Psychological: 1150, 1100, 2010 Highs and January Lows