Yesterday's rally fueled by better than expected Prelim GDP data has almost been erased and the futures are trading back below the psychological 1050 level. Investors are slamming U.S. equities again after Personal Spending and the Core PCE Price Index both came in below analyst expectations. On a positive note, today's Chicago PMI headed over 50, registering expansion (50+) for the first time since September 2008. Hence, manufacturing continues to benefit from the Dollar's recent round of depreciation. However, investors should keep in mind that this week's economic data has been very weak overall. Placing yesterday Prelim GDP number aside, we received weaker than expected unemployment, spending, housing, durable goods, and consumer sentiment data this week. Hence, the path to recovery is riddled with speed bumps, providing investors with enough incentive to take profits and place a downward pressure on equities. The sore thumb continues to be the U.S. Unemployment Rate. The decline in Unemployment Claims has been agonizingly slow and is leveling off again. The high level of unemployment is clearly weighing on consumer sentiment and consequently personal spending.
Meanwhile, investors are a bit concerned that some central banks will tighten their liquidity too quickly and choke the global economic recovery. After all, economic data has been mixed, and despite the positive Q3 earnings season we have yet to see how corporations can perform once stimulus measures wear off. The U.S. will kick off next week with ISM Manufacturing PMI and Pending Home Sales releases. The Fed will also make a monetary policy decision on Wednesday, meaning present volatility should carry over into next week.
Technically speaking, yesterday's rally was unable to overstep any significant topside barriers. The futures are back below the psychological 1050 level and are testing Wednesday lows. Meanwhile, the futures are falling even further behind what is now our 2nd tier uptrend line. We've highlighted this trend line several times in the past since it runs through October lows. The S&P's inability to get back above our 2nd tier uptrend line is a disconcerting sign, and indicates that the S&P futures may retrace towards October lows (1013) after all. That being said, October lows (1013-1020) serve as the next technical cushion along with the highly psychological 1000 level. As for the topside, the S&P face 1050 along with 10/27 highs and our new downtrend lines.
Supports: 1042, 1036.5, 1030.5, 1023, 1014.25
Resistances: 1050, 1060.5, 1066.5, 1070.5, 1082.25
Psychological: 1050, 1075, 1000