Friday’s Outlook Of S&P Futures

The S&P futures posted another impressive rally on Thursday, following through on Tuesday’s furious bull-run.  The large movement upwards came in reaction to Citi (C) and BofA (BAC) reiterating they are presently sound financially, and will not need to be nationalized to stay afloat.

Additionally, Obama gave what can be considered a ‘business-friendly’ speech, emphasizing the need for reform while keeping the entrepreneurial spirit intact.  Finally, retail sales showed an improvement, declining only 0.1% versus estimates of a 0.5% decline.  Investors ignored another discouraging unemployment claims release, which we view as a more relevant indicator of the economy’s health.  Germany continued its week of alarmingly negative data, showing industrial production decreased by 7.5%, nearly 130% worse than analyst expectations.  Therefore, we can attribute Thursday’s gains in the S&P futures to little more than psychological assurances from Obama and the major banks.

Though the sign of leadership was sorely needed, we have seen little concrete evidence to alter our negative outlook on the S&P futures trend wise.  While we expected a follow-through from Tuesday’s gigantic gains, investors will need substantial evidence to fully commit to an economic recovery in the U.S.

Unemployment and foreclosures are still rising and global production is in a freefall.  The U.S. will release heavily-weighted consumer sentiment data today and Treasury Secretary Geithner will address the G20 conference.

The S&P futures still face our 3^rd tier uptrend line, and we can easily plot a 4^th tier on our chart of the situation calls for it.  Hence, U.S. equities still have much to prove to continue their ascent to 800.

Fundamentally, we find resistance of 760.75 with additional resistances hanging at 771.5, 778.75, and 785.5.  To the downside, we see support of 750 with additional supports sitting at 740.5, 732.75, and 722.  The S&P futures are currently trading at 757.75.

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