The S&P futures are setting fresh 2009 highs after earnings from Intel and JPMorgan topped analyst expectations. In addition to positive Q3 earnings, U.S. Retail Sales printed stronger than anticipated while China's Trade Balance revealed a sizable improvement in both exports and imports. The vast improvement in China's imports is the most important figure of the Trade Balance since it indicates consumption as picking up as investors had hoped. Q3 results reveal that corporations are outperforming as we anticipated and they continue to benefit from global stimulus packages coupled with a weakening Dollar. Speaking of the weak Dollar, we are witnessing a breakout in the EUR/USD while the Cable makes an impressive run at 1.60. Activity in the EUR/USD is most important since it is separating from our key 3rd tier downtrend line. Meanwhile, crude futures have popped above their own important 3rd tier downtrend line and are trading at the psychological $75/bbl. Therefore, the S&P's correlations continue to create an environment which is supportive of an uptrend in U.S. equities.
Technically speaking, although U.S. equities have surpassed 1075, the 1100 level could prove to be a more challenging psychological obstacle. Furthermore, we recognize 1.50 in the EUR/USD, 1.60 in the Cable, and the $75/bbl and $80/bbl levels in crude. Hence, the S&P and its correlations are approaching some potentially challenging topside technicals. As for the downside, the S&P futures have several uptrend lines along with consecutive higher lows (10/13, 10/9, 10/7). Additionally, the psychological 1075 should begin acting in the S&P's favor. In terms of fundamentals, investors will continue to digest Q3 earnings throughout the week along with tomorrows CPI and weekly Unemployment Claims data. Better than expected results all around would likely fuel a test of the psychological 1100 level.
Resistances: 1085, 1100
Supports: 1076.25, 1067.75, 1063.5, 1058.25, 1051.75, 1045.5
Psychological: 1100, 1075, 1050