The S&P futures are experiencing a brisk selloff despite BofA earnings coming in far above analyst expectations. The weakness comes as the U. S. government hints that it will likely convert its preferred shares in banks to common shares as opposed to asking Congress for more funding.

In effect, the government will have a controlling stake in several banks, meaning they could finally be giving into nationalization. The reality of nationalization is hitting equities hard, and implies that the capital ratios of some banks undergoing `stress tests' are questionable.

The news sets off a domino effect, making investors question the results of the `stress tests', raising uncertainty and placing large downward pressure on equities.

Furthermore, earnings season is heating up and investors are worried the results from many corporations will be negatively impacted from the financial crisis. The markets are waking up from a very quiet week and we could see volatility rise.

The deflection of the S&P futures from our 3rd tier downtrend line could end up being a critical turning point with the futures failing to climb above February highs. The significance of the selloff taking place in equities is reflected by the today's huge downturn in crude.

Crude futures are collapsing, reigniting fears that a second wave of the economic crisis is approaching. Also, the EUR/USD and GBP/USD have logged significant losses over the past two sessions. These movements are proving to be forewarning considering the positive correlation with U. S. equities.

If the USD/JPY should follow suit, currencies will be sending a resounding negative message. Before we get too far ahead of ourselves, the S&P futures still have key defenses to the downside, particularly April 8 lows and the highly psychological 800 level.

Furthermore, the futures should find some support in our 1st and 2nd tier downtrend lines. The U. S. won't release any significant economic data until Thursday's weekly Unemployment Claims.

Therefore, focus will be on corporate earnings and EU/British economic data over the next few sessions. Fundamentally, we find supports of 834.75, 829.50, 825, 819.25, and 813. To the topside, we see resistances of 840.25, 844.75, 850.50, 856.25, and 862.5. The S&P futures are currently trading at 837.50.

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