The rally in the S&P futures fizzled yesterday to end with modest gains.  Uncertainty is returning to the market as the bankruptcy of both GM and Chrysler seem more likely by the day.  The failure of these two large auto manufacturers could have a systemic impact on unemployment and consumption, further weakening a sagging U.S. economy.  Though financials finished with large gains on Tuesday, they still sit at questionable levels.  The S&P futures were fighting to close back above the highly-psychological 800 level earlier today, but the futures are faltering after the ADP Non-Farm Employment change came in much lower than analyst expectations. 

To make matters worse, the last release was revised downwards.  With Pending Home Sales and the ISM Manufacturing PMI on deck, the S&P futures could be under increasing selling pressure if these data points also disappoint expectations.  The fact that the futures are settling for a sub-800 reality indicate any movements downwards could be swift and sharp.  Meanwhile, crude futures are losing a psychological battle of their own, failing to boost back above the $50/bbl level.  Additionally, the 30 Year T-Bond futures are breaking out after stabilizing above their near-term downtrend line. 

Hence, the correlations are all pointing towards a sell-off in the S&P.  The much-anticipated G20 Summit begins today.  If the big players at the summit make limited progress in plans for modifying in the international financial system, the selloff in the S&P futures could exacerbate in the near-term.  With the negatives out of the way, the S&P futures are beginning to build a nice base with all of their erratic movements.  Therefore, the futures are holding out with the hope that the bulls can come help stabilize and send the market back into its near-term uptrend.  The S&P futures will have to get through our 3rd tier downtrend line 1st, which proved to be a reliable foe yesterday. 

Therefore, we’re witnessing a significant battle between the near-term uptrend and medium-term downtrend.  It is likely the fight could be resolved by the end of the week considering all of the data and economic news we’ll be taking in over the next few trading sessions.  Fundamentally, we find resistances of 790.25, 794.5, 801.75, 811.75, and 821.5.  To the downside, we see supports of 782.5, 775, 769.5, 761, and 755.  The S&P futures are currently trading at 785.50.

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