The S&P futures posted an incredible rally on Tuesday fueled by Citigroup claiming itself profitable thus far in 2009. The financials surged with Citigroup and Bank of America climbing an astronomical 38% and 28%, respectively.

The movement was backed by solid volume, allowing yesterday's rally to become a possible 1st step in a permanent bottom. The S&P is trying to follow through on Wednesday, trading up over 1% pre-market. However, before we get too excited, we must realize there are multiple layers of downtrend lying in the road ahead.

Rate follows GBP in two-way action, holding support now above the 1.2600 area once again. Aggressive traders can add to open longs on this dip but BE CAREFUL as volatility is just huge.

Test of today’s lows likely at this point but traders note big names on the buy side on dips under the 1.2600 and 1.2620 area. Cross-spreaders supporting rate as GBP drops. Upside stops likely building in the overhead resistance at 1.2720/30 area now with stops likely the other side.

Rate whipsaws hard, both sides get hurt as stops cleared first to the upside and then to the downside putting the 23 year lows in sight. Reversal off weekly highs a negative technical; Likely an upside rally is still in the works but the rate needs to rebound hard to wash-out the shorts again.

After today’s action I think both sides will take a break. Traders report stops in-range adding for two-way action. Long-term tech resistance now at 1.5000 area likely to cap near term but stops are building above and the 1.5000 handle is a big psychological number.

It was a wild ride in the major pairs today as the USD fell sharply ahead of the New York open only to reverse hard and make highs in some pairs ahead of the close; traders note that participants were caught “wrong footed” after the New York open and stops from late longs in some pairs liquidated trades done expecting a higher close in the majors. Despite a 300 point rally by the DJIA today the USD continued to attract buyers after the London fix but traders note that the rally in at least two pairs was on thinner volume possibly exaggerating the moves.

Rate follows GBP in two-way action, holding support now at 1.2550 area once again. Aggressive traders can add to open longs on this dip. Cross-spreaders supporting rate as GBP drops. Stops building on both sides as the rate tests for stops on the downside first.

Upside stops likely building in the 1.2630/50 area again, overhead resistance at 1.2720 area now with stops likely the other side. Key 1.3030 area likely next; failure to hold 1.2900 likely going to be the test for the bulls this week. Close above key 1.3030 area needed for further upside until then rallies likely to be sold so expect more two-way action.