S&P Daily Commentary for 4.27.09

The S&P futures are heading south Monday morning as investor anxiety heightens in reaction to the Swine Flu.  Saddled with the burden of a global economic crisis, a worldwide health concern is the last thing U.S. equities need.  Fragile corporations need forces adding to, not detracting from consumption and international travel.  The S&P futures were making significant progress fundamentally prior to the outbreak of Swine Flu.  The futures had overcome our crucial 3rd tier downtrend line, but failed to close above April highs.  The S&P futures have been hit with an unexpected form of uncertainty, adding an ill-fated barrier to the topside.  U.S. equities could be sent tumbling lower if the Swine Flu were to spread and mutate into a dangerous strain outside of Mexico. 

However, the S&P futures are holding on for now, and could be wedged between our uptrend line and 3rd tier downtrend lines until the U.S. releases its Prelim GDP on Wednesday.  This is a critical time for the S&P with new highs and a large breakout within reach.  Investors have weathered disappointing corporate earnings and the news that at least one U.S. bank will need more federal funding, all in the hope that the global economic crisis is abating. 

Unfortunately, the possibility of systemic risk remains and the threat of Swine Flu only adds one more concern to an overloaded plate.  Correlation wise, crude has collapsed back below $50/bbl while gold’s uptrend holds steady. 

On the FX side, the EUR/USD and GBP/USD have each sold off with the USD/JPY facing its demons to the downside.   Hence, all of the ingredients are into the kitchen for the S&P futures to cook up a heap of losses.  As a result, although near-term momentum remains in the uptrend’s favor, the downtrend is threatening once more.

Fundamentally, we find resistances of 853, 860.75, 867 and 872.75, respectively.  To the downside, we see supports of 846.5, 840.25, 833.5, 825.25, and 820.  The S&P futures are currently trading at 850.00.

S&P Daily Commentary for 4.27.09

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