The S&P futures are up slightly after Monday's intense sell-off as investors await Pending Home Sales and Fed Chairman Bernanke's testimony before Congress. U. S. equities came under intense selling pressure yesterday despite slightly better than expected ISM Manufacturing PMI and Consumer Spending data.

Investors were locked in on the government's most recent bailout of AIG after the insurer posted a horrible earnings loss. The term traveling around town is `systemic risk'. In other words, companies such as AIG and Citigroup may be too big to fail, posing substantial risk to the entire financial system. Citigroup logged another 20% loss while BofA lost another 8% and change.

Furthermore, corporate behemoths such as U. S. Steel, Alcoa, Dow Chemical and GE continue to post significant losses which are overshadowed by the situation of the U. S. banks and insurers. Additionally, we can't forget GM and Ford are around $2/share. Once one steps back and takes a look across the board, the problem is much bigger than the banks. If the sell-off should continue, we could soon see Dow, GE, and Alcoa each trading under $5/share.

The concept is a bit extreme, showing the significance of the economic contraction taking place. Not only are investors pricing Citi and BofA for broke, soon they could be pricing the core of the American economy for bankruptcy. The longer Citi, AIG and the lot stay afloat, the longer the downturn could last.

Therefore, we would not be surprised to see the U. S. `seal the deal' relatively soon and follow through by nationalizing Citi, AIG, and possibly Bank of America. Who knows, big brother may have to swoop in and pick up GM and Ford along the way. The focus will come down to raw economic data. If the data does not improve, neither does the stock market.

Since Obama's stimulus packages could take months to trickle down into the economy, the government may have to act soon rather than later. Meanwhile, the S&P futures are finding solace in the psychological 700 level. However, we have not seen a high volume buying spree yet, showing investors aren't quite ready to initiate a temporary bottom.

If the S&P should fall below the 700 area, we could see some more significant selling before the buyers finally step in and stabilize equities again. Fundamentally, we find resistances of 712.75, 717.25, 723.75, and 730.75. To the downside, we see supports of 708 and 700. The S&P futures are currently trading at 708.25.

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