The S&P futures are locking and popping from Monday lows despite weaker than expected PPI and housing data today. Investors are more encouraged by the positive data coming from Britain and the EU. Inflationary pricing data from Britain is alleviating fears that the BOE's recent injection of liquidity signaled increasing deflationary pressures. Meanwhile, EU Economic Sentiment blew by analyst expectations to register an expansionary reading (50+). As a result, bulls are jumping back in since the S&P's pullback has been driven mostly by profit-taking. Despite today's negative data from the U.S., yesterday's long-term purchases and manufacturing data points were impressive. Therefore, the U.S. economy is sending mixed signals. The surge in the Empire State Manufacturing Index was likely triggered by the ‘cash for clunkers' program, while the improvement in long-term purchases signals foreign investors are picking up U.S. equities and bonds. However, investors should take notice that China just reported that July FDI dropped by -35% MoM as hot money exited the economy. Additionally, China trimmed its U.S. Treasury holdings in June by 3.1%. These are both negative developments for both the U.S. and China, and could impact U.S. equities over the next 24-48 hours. Recent setbacks in China's economic recovery are concerning investors that stimulus measures may be beginning to top out. China has been driving the global economic recovery, and a cool-down in China could deliver a hefty blow to investor sentiment.
Regardless of mixed global signals and yesterday's selloff on climbing volume, the S&P futures remain within striking distance of 1000, keeping the highly psychological level in play. Therefore, the S&P futures may choose to gravitate towards 1000 as investors digest recent market developments. However, momentum has shifted to the downside and investors will need multiple forms of clarification from economic data to clear the 1000 trading zone since 2nd quarter earnings are out of the way. The U.S. will be quiet on the data-front until Thursday's weekly unemployment claims. A pop towards 600k could trigger another pullback in U.S. equities, whereas a surprising improvement in unemployment claims could alleviate consumption concerns created by last week's low U of M reading and weak retail sales.
Technically speaking, the S&P's barriers to the upside are July 30th highs and our 2nd tier uptrend line along with the highly psychological 1000 level. As for the downside, the S&P futures have intraday lows, our 1st tier uptrend line, and July 29th lows serving as technical cushions.
Resistances: 987.50, 993.75, 1001.50, 1006.50
Supports: 981, 976.25, 969.25, 963.50