The SCI's nearly -7% plunge has caught investors off-guard, and the S&P futures are declining despite better than expected Chicago PMI data. However, we suggest investors shouldn't get too carried away with the SCI's selloff since the decline has more to do with liquidity and psychology than economic fundamentals. With the Chinese government tightening liquidity, Chinese investors will likely need to start paying back the loans they've invested into equities, hence the sharp contraction following the news. While China's actions are sure to cool its economy further, we believe wrangling in liquidity is the best choice for China's economy over the medium to long-term. Tightening liquidity and deflating the asset bubbles should help China avoid a more dramatic downturn in the future, securing the economy's longer-term growth trajectory. Investors will get another peek at the state of China's economy at the open of the Asian trading session tomorrow. China will release some important Manufacturing PMI data and investors will be looking for China's rapid economic recovery to continue. These PMI numbers should be market movers since investors have been paying particularly close attention to the Chinese economy lately.

The U.S. will release Manufacturing PMI data of its own on Tuesday along with Pending Home Sales. While we expect Pending Home Sales to come in positive due to the upturn in America's housing market, the key will be for the ISM Manufacturing PMI to turn positive for the first time since July 2008. Tomorrow's ISM heading for expansion (50+) could have a positive impact on investor psychology. Combined with a better than expected Chinese Manufacturing PMI, the S&P could experience a substantial rebound. However, if both numbers miss expectations, we could witness exactly the opposite and a sub-1000 S&P. Meanwhile, the FX markets are experiencing a broad-based depreciation in the Greenback, a bit odd considering the pullback in equities. However, the Dollar could be ahead of the curve, signaling a better few sessions ahead. On the other hand, crude futures are freefalling below $70/bbl and our 1st tier uptrend line. Therefore, crude is sending quite the opposite message. Investors may opt to see tomorrow's wave of data before making a stronger commitment in either direction. We can say immediate-term momentum is shifting to the downside. If our 1st tier uptrend line doesn't hold we could witness a more protracted selloff. However, the 1000 trading zone should continue to play a prominent role and will be tough to defeat. As for the topside, the S&P futures need to brave above our 2nd tier uptrend line and the lid of the 8/21-8/31 trading range.

Price: 1016.25

Supports: 1015, 1010.75, 1002.25, 995.25

Resistances: 1023.5, 1030, 1034, 1038

Psychological: 1000