The S&P futures are recovering from earlier losses after BofA and GE earnings disappointed analysts. In addition to negative earnings reports investors are also digesting weaker than expected Prelim UoM Consumer Sentiment data. TIC Long-Term purchases also came in slightly below expectations. The overall drop-off in long-term purchases is disconcerting and signals a lack of international interest in U.S. Treasuries. Therefore, we would not be surprised to see more reports mentioning the continued diversification of global reserves away from the Dollar. The TIC's downtrend reinforces the negative sentiment towards the Dollar. However, this is good news for the S&P's near-term outlook because a weaker Dollar makes U.S. equities cheaper and encourages international investment. On the other hand, it appears U.S. equities may continue to underperform emerging markets since America's economic fundamentals are so mixed. Today's negative Q3 earnings and econ data follow yesterday's positive readings. IBM and Google surpassed estimates and we saw improvements in the Empire Index and Unemployment Claims. The mixed results are keeping cash on the sidelines since the drag in unemployment and diving Dollar are causing uncertainty concerning the sustainability of the recovery.
Meanwhile, the S&P futures are facing that hefty 1100 psychological level we talked about before. The EUR/USD and gold are battling their own demons at 1.50 and $1050/oz, respectively. Additionally, crude is approaching its psychological $80/bbl level. Therefore, although the markets are sending bull signals the S&P and most of its correlations are facing psychological barriers. While we're still positive trend-wise on the S&P, we will have to see how upcoming earnings pan out and how the Dollar reacts next week to central bank statements along with key economic data from China on Wednesday. If China's data meets or beats as we suspect, this could drive the S&P futures beyond 1100. However, any sign of a slowdown in China would undoubtedly deal a blow to global equity markets. We are also interested to see how EU PMI data prints on Friday. The S&P's recent strength has been driven by a weak Dollar and investors shouldn't forget that both the EU and Britain have shown signs of cooling. Any further cool down in econ data over the next week or two could shake confidence in the recovery.
Technically speaking, the topside hurdles are clearly intraday highs and the psychological 1100 level. As for the downside, there are several uptrends we can form while the 1075 and 1050 levels serve as a psychological cushions. The S&P futures continue to set higher lows and this creates layers of support for the future.
Resistances: 1085, 1089, 1094, 1100
Supports: 1078.25, 1075, 1066.75, 1057.75
Psychological: 1100, 1075, 1050