The S&P futures are tacking onto yesterday’s losses, pulling back to our important 1st tier uptrend line. Our 1st tier uptrend line carrier considerable weight since it runs through September lows, which also represent the highly psychological 1000 level. Therefore, any drop beneath our 1st tier on substantial volume could trigger a more protracted selloff towards 1000. Yesterday’s decline came on heighted sell-side volume, and we notice an increase in negative activity today. Therefore, the S&P’s uptrend is facing its first formidable challenge in quite some time.

While the S&P’s 1st tier is holding up, the Cable and crude futures were not so lucky. The Cable has been hit by another wave of extensive downward pressure after BoE Governor King made another round of dovish comments. Meanwhile, crude futures have been hammered by the combination of an inventory surplus and a decline in Chinese crude demand. Lastly, U. S. Treasuries are strengthening and staring down previous September highs. Hence, while the S&P’s 1st tier uptrend line is holding strong, the behavior of the index’s correlations are raising investor uncertainty.

The Federal Reserve kept its monetary policy unchanged yesterday as we anticipated. However, the Fed has announced the discontinuation of a couple corporate liquidity measures today. While this decision is a drop in the bucket in the grand liquidity scheme, it seems the Fed is opting to play some psychological games to help buoy the Dollar. The FX markets are taking notice, and investors should eye the technical behavior of the Greenback for the remainder of the week. Even though the Fed is halting a couple liquidity programs, we still don’t believe the Fed will tighten for quite some time since economic fundamentals are still in a fragile state. This week we’ve seen a pullback in global economic data, showing the recovery is cooling off a bit. It remains to be seen whether this is a speed bump on the path North, or the beginning of a more substantial deterioration.

For the time being, the S&P futures may opt to stay above our 1st tier uptrend line until we receive tomorrow’s wave of U. S. economic data. The U. S. will release Durable Goods Orders, New Home Sales, and the Revised UofM Consumer Sentiment. Even though today’s Existing Home Sales number missed expectations, weekly Unemployment Claims experienced an encouraging decline. Additionally, investors shouldn’t forget the very positive batch of U. S. economic data we received last week. Positive econ data tomorrow could help buoy the S&P futures and avert a more protracted selloff. On the other hand, disappointing numbers would only exacerbate the S&P’s pullback. Even though the S&P’s uptrend is intact, we are initiating a neutral stance on the futures due to the worrisome behavior of some of their correlations. Therefore, we believe investors should exercise caution for the immediate-term.

Price: 1046.5

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