The S&P futures surged higher yesterday, posting a remarkable defense of our previously highlighted key long-term uptrend line and the psychological 1050 level. Buying in the4 S&P futures returned with a vengeance after U.S. manufacturing PMI data came in at 56.3, topping analyst expectations of 53.2. Considering investors have only been receiving negative U.S. data recently, the encouraging PMI reading gave bulls ammo to take advantage of oversold conditions. Wednesday's impressive rally has saved the S&P's long-term uptrend for the time being after flirting with the concept of entering a more lasting contraction. The most encouraging part of yesterday's manufacturing PMI reading is that the reading had been on a steady downtrend. The reversal sets up the possibility of only a large step down in the U.S. economy and not a double dip. Analysts flooded the wires with estimates ranging from 25-33% chance of a double dip, meaning odds are the U.S. economy will continue to stabilize over the medium-term. The sudden shift in sentiment clearly had an immediate impact on sentiment and we'll have to see whether equities can post a confirmation rally before week's end. Markets will have more than enough ammo to make game-changing movements with pending home sales on tap and headline employment data highlighting on Friday. Should employment data happen to surprise to the upside then there would likely be another large rally in equities and the S&P futures could have enough energy to drive past their highly psychological 1100 level. However, unemployment claims are still historically high and yesterday's ADP figure was nothing to cheer about. Hence, should tomorrow's employment data disappoint then sentiment could turn sour once again. The ECB will also make its monthly monetary policy decision today, meaning investors will have a hefty amount of psychological and fundamental developments to digest over the next 24-48 hours. That being said, we expect an active end to the trading week.

Price: 1081
Psychological: 1050, 1000

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