The S&P futures are giving back some of yesterday's gains in reaction to China's second calling for a new global monetary standard.  China may be reacting to America's complaint to the WTO concerning unfair trade practices.  It seems the U.S. and China are taking jabs at one another as China tries to leverage its advantageous position financially.  The S&P is also reacting to the cautionary statements in Britain's semi-annual financial stability report.

The BOE stressed that Britain's financial system is in a fragile state and any further shocks could destabilize the economic recovery taking root.  Despite the wave of negative sentiment today, the U.S. released a better than expected UofM consumer sentiment number.  The consumer sentiment data seems to be enough to limit today's downward momentum.  Therefore, it appears the trading range of the S&P may not be broken today with no more economic data on the plate.

The battle between the bulls and the bears continues in the S&P, and 900 is proving to be as psychological as we imagined.  Investors are uncertain whether to bank on the continuation of the present economic recovery or do further technical damage to the S&P futures.  The U.S. unemployment problem persists as weekly unemployment claims came in higher than analyst expectations.  Our concept of a possible head-fake in economic data may be materializing as we've seen several figures in both the U.S. and EU revert towards negative territory.

The mixed behavior of economic data makes investors uneasy while investment gurus such as Warren Buffet and Jim Rogers maintain their cautious outlook concerning the state of the U.S. economy.  Despite the negativity creeping back into the marketplace, bulls aren't will to give up on all of the progress made thus far this year.  As we explained previously, the S&P built up a solid foundation between 880-900 and it will take a large shift in momentum to break through this consolidation zone. Meanwhile, the S&P futures are being squeezed between our 1st and 2nd tier near-term downtrend lines.  We have yet to see a decisive move in either direction.  Until we do, we will maintain a neutral stance on the S&P futures.

Consolidation wise, the erratic consolidation of the GBP/USD and EUR/USD reflect the indecisiveness present in the S&P.  However, we notice that the 30 Year T-Bond futures continue to strengthen.  Normally, this would be a negative indicator for the S&P since the two are negatively correlated.  On the other hand, investors have been concerned about the impact of higher yields on the economic recovery as a whole.

Hence, the S&P futures may actually find comfort in declining Treasury yields for the time being.  As for crude, the futures are rallying on yesterday's report showing yet another decline in inventory.  Hence, it is unreliable right now to evaluate the S&P based on the performance of crude since the drop in inventory is likely a result of lower OPEC production.  Overall, the correlations show that the S&P futures are at an intersection.         

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