As anticipated, the S&P futures are having trouble with the highly psychological 1000 area. The futures are wavering around 1000 while continually finding support at our
2nd tier uptrend line. Today’s slight pullback comes despite better than expected weekly Unemployment Claims. The S&P’s relative inaction comes after the disappointing ISM Non-Manufacturing PMI and Non-Farm Employment Change data yesterday.

Additionally, investors are reacting to the BOE’s decision to administer a monetary shock by injecting another $84 billion into its QE plan. The BOE’s injection caught investors off-guard, and the Pound is experiencing a rapid depreciation against the Dollar as a result. We believe the BOE is taking advantage of the rampant optimism surrounding the outperformance of British economic data. The BOE is playing it safe, depreciating the Pound in an effort to protect the export side of its services and manufacturing industries in case the global economy should cool in Q3.

The BOE’s cautionary action is denting the S&P’s upward momentum, injecting a bit of uncertainty along with the liquidity. However, we believe the BOE’s monetary shock will only be temporary, and may be soon forgotten should tomorrow’s economic data outperform. We’ll get more important data from the U. S., including the headline unemployment rate. Britain will also release its PPI number. Weak PPI data may not necessary be a bad thing since it could justify today’s liquidity measure. However, weaker than expected data could give investors a reason to send the S&P futures packing towards our 2nd tier uptrend line and August lows.

Meanwhile, investors should keep a close eye on the developments in the FX market. Though the GBP/USD is under considerable immediate-term downward pressure, it will be interesting to see how the EUR/USD and gold hold up along their respective 2nd tier downtrend lines (see addt’l commentary). If these downtrend lines don’t hold, the S&P futures could be in for a more sizable pullback. We also notice the 30 Year T-Bond futures are trying to form a new base, a negative immediate-term development considering their negative correlation with U. S. equities. Hence, investors should monitor immediate-term developments in the S&P’s correlations.

Price: 966.00

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