The S&P futures are trading sharply lower pre-market due to global risk aversion with rising investor uncertainty. Today's movement comes in reaction to a negative shock administered by a debt scare in Dubai. As most investors know by now, Dubai World is requesting a debt restructuring of what could be up to $80 billion of credit. Although actual losses incurred are presently unknown, some European and UK banks could have considerable exposure. This week's news concerning Dubai's debt has shocked FX and equity markets as investors worry that the development may indicate forthcoming problems from other emerging economies. As a result, Asian markets have been under intense selling pressure, and European/U.S. equities look set to open sharply lower. Meanwhile, the FX markets are experiencing a broad based appreciation of the Dollar and Yen as gold crashes back below $1150/oz. Hence, it seems short-sellers have finally received the psychological trigger they were waiting for to unwind the bull-run in the risk trade. The question now becomes whether equities and currencies can stabilize before heading below more meaningful technical levels.
That being said, the S&P futures are presently recovering from intraday lows and are attempting to climb back above our important 1st tier uptrend line. Our 1st tier carries extra weight because it runs through previous November lows. Hence, a failure of our 1st tier could result in a more protracted retracement towards the 1025 area. As for the topside, the highly psychological 1100 level becomes a technical barrier once again. Meanwhile, investors should monitor the EUR/USD's ability to keep above our 1st and 2nd tier uptrend lines as well as the ability for all other major Dollar crosses to stabilize. While today's gains in the Dollar are sizable, important uptrend technicals are intact for the most part, meaning the S&P futures still have the opportunity to weather the storm from Dubai and maintain their upward trajectory. Hence, added emphasis could be places on next week's economic data releases.
Although this 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. Altogether, the shock from Dubai is overshadowing positive developments fundamentally. Hence, should next week's data come in positive investors may opt to restrain the negative impact from Dubai's debt issues. In focus will be China's Manufacturing PMI and the RBA meeting late Monday EST followed by UK and U.S. Manufacturing PMis on Tuesday.
Resistances: 1083.75, 1087.75, 1093, 1097, 1102.5, 1109.75
Supports: 1075.75, 1071.5, 1067, 1062.75, 1056.75, 1052.25
Psychological: 1075, 1100, 1050, November Highs and Lows