Morning Futures Roundup

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Major Trend-line Being Put to Test in S&P Futures

   Fundamentals
The line has been drawn in the sand, or more appropriately, the uptrend line has been drawn on the chart for the S&P futures, as the recent correction in the index has been stymied so far by a major trend line drawn from the major lows made back on October 4th of 2011. Fundamentally, we have seen a mixed bag of data -- better than expected earnings being reported by some major banks, industrial metals producers and an internet juggernaut; increased lending by Chinese banks and tame consumer and producer inflation readings being offset by a jump in jobless claims; lower than expected 1st quarter GDP readings from Chin; and continued concerns about European sovereign debt, with the disappointing March Non-farm Payrolls report being the biggest weight on investors' psyche.

Trading activity has been rather volatile this past week, with the S&P hitting 1-month lows early in the week, only to be followed by a 30+ point rally over two trading sessions, which appeared to have halted the recent price correction in its tracks. However, a weak close to end the week has made many traders a bit nervous going into the weekend. Given no clear trend coming from the fundamentals, it appears that technical considerations may have been a bigger influence on traders recently. It may behoove market participants to focus on any attempts to move the index below the October 4th trend line, as a weekly close below this line could spark the beginning of a potentially major price correction. However, should this trend line hold, some equity bulls may feel more comfortable adding to long positions and setting up a potential move above 1400.00.

   Technical Notes
Looking at the daily continuation chart for the E-mini S&P 500 futures, we notice prices being bounded by the above-mentioned uptrend line and the 20-day moving average. Trading volume on the price bounce this week has been rather lackluster, which may be aiding the bearish argument that a major price correction may be in the works. There may also be a rounded-top forming on the daily chart, but it would take a move below 1338.50 to confirm the chart pattern.

The 14-day RSI is in neutral territory, but it has started to trend lower, with a current reading of 45.98. 1350.00 is now seen as the next support point for the June futures, and should we see the index fall below the March 6th low of 1338.50, there does not appear to be any technical support until we reach the 200-day moving average, currently near the 1269.00 level. Resistance is found at the 20-day moving average near 1393.00.

  
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