The S&P futures have crashed below our 3rd tier downtrend line and are presently trading beneath the highly psychological 800 level. The S&P futures are flirting with dangerous territory in reaction to the government's rejection of the automakers' restricting proposals.

The viability of GM and Chrysler are thrown into doubt and the possibility of bankruptcy is all the more likely. Furthermore, if GM and Chrysler are allowed to fail, then the market may force Ford to follow suit in what could be an industrial collapse. The inevitable can't be delayed too much longer.

The repercussions of a collapse in the U. S. auto industry are unknown, but should be far-reaching. To make matters worse, Treasury Secretary Geithner delivered the second of a one-two punch by stating that the major banks may require a lot more assistance to stay afloat.

Analysts are spreading the word that BofA and Citigroup performed poorly in March compared to the first two months of 2009. Surprise! As we pointed out in our previous posts, a quarter consists of four months, not two.

Therefore, it seems the CEOs were playing mind games after all, hoping they could fight the tide by giving investors the impression that all was well. The downfall of psychologically-led rallies is that investors have to deal with reality at the end of the day.

Therefore, it seems a reality check is coming as deadlines and earnings approach. It's no surprise the S&P futures are putting up a fight around 800 considering its psychological significance.

However, the fact that the futures are opting for the underbelly of 800 indicates we could be in for a huge sell-off today. The grass certainly isn't greener on the other side. Worries about the performance of the EU and British economies have kicked back in first gear.

The concerns are reflected in the rapid selloff in the EUR/USD and GBP/USD. Moving to the Pacific Rim, Japan's Industrial Production managed to come in below reduced expectations, indicating global consumption continues to wane.

Correlation wise, Crude is flirting with $50/bbl and Gold is heading south in a hurry. The coordinated collapse across investment products brings back bad memories of the heat of the economic crisis.

If equities and commodities don't find relief in their psychological supports, then we could witness a massive leg down in equities. Fundamentally, we find supports of 794.5, 790.25, 782.5, 775, and 769.5. To the topside, we see resistances of 801.75, 811.75, 818.75, and 827.5. The S&P futures are currently trading at 796.00.

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