The S&P futures are on the cusp of a large near-term breakout should they decide to topple our 2nd tier uptrend line, the psychological 950 level, and 2009 highs. However, the futures are shedding earlier gains in consolidation amid psychological hesitation. Regardless, the S&P’s correlations are taking the lead with gold and the EUR/USD busting out from our previous downtrend lines on aggressive movements to the upside. Meanwhile, the 30 Year T-Bond futures continue their slide lower from their near-term uptrend line. Hence, it appears investors are gaining more confidence in the economic recovery, willing to put more money into higher-risk investment vehicles.

The optimism comes after CIT announced it has reached an agreement with bondholders, securing around $3 Billion dollars in liquidity for the struggling financier. The possibility of a CIT bankruptcy was capping gains amid last week’s impressive 2nd quarter earnings releases, giving investors one less reason to be pessimistic for the immediate-term. Furthermore, Goldman Sachs’ chief U. S. investment strategist, David Kostin, raised his year-end outlook on the S&P from 940 to 1060. These two positive news developments are overshadowing the IMF’s cautionary statement regarding Britain’s financial state. The IMF warned the Pound could be under selling pressure over the medium-term should Britain not shore up its budget balance. However, investors are more focused on the optimistic immediate-term developments than speculation of what may happen down the line. Therefore, the positives clearly outweigh the negatives at this point. The earnings picture will become clearer after this week since we’ll receive a large chunk of 2nd quarter earnings releases from the major S&P and Dow components.

Even though the today’s rally is fizzling right now, the S&P futures are in a fortunate position. The S&P’s correlations are supporting the environment of a near-term breakout. Meanwhile, we’re running out of near-term resistance levels on the S&P futures, often a positive sign. Furthermore, the psychological barriers are wearing thin. All the futures may need is another positive boost on large volume to get over the hump. Although analysts are leaving the S&P’s movement up to Bernanke, we believe his testimony may not be a market maker. We believe the Fed chairman will play his cards close to the chest while giving investors just enough clarity to be satisfied. After all, why would he choose to personal wreck the positive situation created by solid earnings thus far? We predict forthcoming earnings will play a larger role in the S&P’s movements. More better than expected 2nd quarter releases could be just what the doctor ordered. On the other hand, mixed/disappointing earnings could rattle the S&P’s rally.

Copyright 2009 FastBrokers, Latest Forex News and Analysis for Forex, Bullion and Commodity Traders.

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