Today’s attempt to breakout to new 2009 highs has been thwarted thus far by weaker than expected retail sales and weekly unemployment claims numbers. Investors were encouraged by cautiously optimistic words from Bernanke yesterday, though we believe he didn’t provide anything we weren’t expecting. Investors remain generally excited about the global economy recovery, particularly after German and French Prelim GDP numbers swung to growth. However, today’s setback in retail sales and the flat lining present in unemployment claims is tempering optimism since it coincides with a cooling in Chinese data earlier this week. The speed bumps on the road to recovery are capping gains in the S&P futures, and are symptoms of the so-called U-shaped recovery economists have been talking about.

Regardless of today’s setbacks, momentum is sloping higher as the futures look to gravitate beyond 1000. Yesterday’s pop was encouraging because the GBP/USD and EUR/USD participated, exhibiting their positive correlation with U. S. equities. Meanwhile, the GBP/USD, EUR/USD, gold, and the USD/JPY are approaching respective inflection points. This tells us a breakout could be coming in either direction. Since the medium-term uptrend is sturdier than any near-term inclinations to the downside, the breakout would likely be to the topside following further improvements in economic data. However, downtrend inclinations do exist, so investors should keep on their toes and monitor the situation carefully.

The U. S. and the EU will release their CPI data points tomorrow. A solid rise in prices could provide the boost to send the S&P futures beyond previous 2009 highs towards our 2nd tier uptrend line, the futures two barriers to the topside. Meanwhile, the S&P futures have solid cushions to the downside due to the consolidation taking place all month. The 1000 level should continue to play a strong psychological role so long as the S&P is contained by its topside barriers. However, any retracement below August 12th lows and our 1st tier uptrend line on large sell-side volume could result in another step down.

Price: 1007.50

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