The S&P futures are trading back below their highly psychological 1100 level after a series of negative events have led to broad-based risk aversion while placing downward pressure on equities. Today's wave of Dollar and Yen purchasing began during the Asia trading session as China's major banks signaled they are serious about implementing the central bank's tighter monetary policy by decreasing the issuance of new loans. Tighter monetary policy from China has dampened the outlook for global economic performance considering China has been steering the recovery from the nadir of the Great Recession. Additionally, the S&P lowered its credit rating outlook for Japan and while the BoJ and Japan's Finance Ministry expressed concern about the country's economic performance going forward. The combination of negative events concerning China and Japan was enough lead investors away from the risk trade and towards the Dollar and Yen, a negative development for U.S. equities considering correlative forces.
Meanwhile, the UK released a Prelim GDP figure 3 basis points below analyst expectations, showing the economic recovery in developed countries could be losing steam. Speaking of which, U.S. Existing Home Sales disappointed yesterday and investors will receive CB Consumer Confidence shortly along with Obama's budget proposal. Rumors are circulating that Obama will freeze certain elements of fiscal spending. Hence, Obama seems to be flexing a more conservative fiscal policy, a positive for the Dollar and negative for equities. Additionally, the U.S. will release New Home Sales tomorrow followed by the Fed's monetary policy decision. Hence, volatility could remain at a heightened state over the next couple trading sessions. That being said, investors should keep an eye on key supports in the major Dollar pairs as well as gold's ability to hold above previous January lows for further deterioration in these investment vehicles could yield additional weakness in the S&P futures.
Technically speaking, our uptrend lines are fading into the distance as the S&P futures separate themselves from 1100. This is a negative development concerning the S&P's medium-term outlook since our 1st tier uptrend line runs through November lows, or the 1025 area. As for the topside, the S&P futures face technical obstacles in the form of 1/24 and 12/4 highs along with the psychological 1100 level should it be tested.
Resistances: 1088.75, 1093.75, 1098.75, 1102.50, 1106.75
Supports: 1083.50, 1080.25, 1077.75, 1072.25, 1069.75
Psychological: 1100, 1075, 2010 December highs and lows, November lows