The S&P futures continue to hold strong above their highly psychological 1100 level despite a disappointing set of housing data. Housing Starts and Building Permits both missed analyst expectations, implying the U.S. housing recovery may be facing headwinds. That being said, the core and headline CPI numbers topped expectations by a basis point, showing consumer prices are rising despite yesterday's decline in producer prices. Such a development could benefit corporate gross margins and benefit the 4th quarter earnings season. Regardless, this week's data has thus far indicated a slowdown in America's economic recovery. However, it remains to be seen whether this is just a bump in the road to stronger fundamental growth rates.
Meanwhile, the negatively mixed data points continue to support a loose monetary policy from the Fed. Although CPI did edge up this time around, the basis point increase likely won't have too large of an influence on the Fed's next policy decision. Focus will now shift to tomorrow's weekly Unemployment Claims release along with Philly Manufacturing Index. Since high unemployment has been a sore thumb in the recovery from yearly lows in the S&P, a sub-500 reading in the weekly Unemployment Claims data point could result in a slight return to the risk trade, thereby benefitting the S&P futures. However, an unexpected rise in Unemployment Claims could send the S&P futures back towards mid-November levels. Correlation-wise, the EUR/USD and AUD/USD seem to be following the S&P's consolidative pattern while the Cable heads back below our 4th tier downtrend line. Therefore, topside resistances remain in the S&P's positive correlations, highlighting investor hesitation in regards to the near-term direction of U.S. equities.
Technically speaking, we're presently unable to place any near-term topside technicals on the S&P futures due to a lack of perspective. However, the psychological 1100 area continues to play a key role considering it has been a strong technical barrier for the past month. On a positive note, the S&P futures have avoided a sizable retracement below 1100 following Monday's breakthrough. Meanwhile, the S&P futures have multiple uptrend lines serving as technical cushions along with the psychological 1100 level and 11/13, 11/09, and 11/05 lows.
Resistances: 1107, 1112
Supports: 1098.75, 1090.75, 1082.5, 1071.25, 1061.75
Psychological: 1100, Previous 2009 Highs, 1075