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June 4, 2012  Mon 7:19 AM CT

SPX: SEE CHART GET CHAIN FIND STRATEGIES
U.S. equity futures have bounced back from steep losses last night as Asian indexes entered bear market territory.

China provided more evidence of a slowing economy as its non-manufacturing PMI dropped to 55.2 in May from 56.1 in April. U.S. factory order are to be reported at 10 a.m. ET today.

The June S&P 500 futures are up 3 points, or 0.26 percent, to 1277.00. The June Nasdaq 100 contracts are higher by 7.50 points, or 0.31 percent, to 2462.50. Overnight the SPX futures hit a low of 1262, below its 1265 support level; NDX remains above its support of 2440.

The German DAX is well off its session lows, now down 0.71 percent. The U.K. FTSE 100 is lower by 1.14 percent after German Chancellor Angela Merkel rejected a proposed debt-sharing program.

Asian indexes fared much worse. Hong Kong's Hang Seng lost 2.01 percent, and Japan's Nikkei 224 fell 1.71 percent.

Despite persistant credit fears in Europe, the dollar is lower against the euro. The U.S. Dollar Index is down 0.118 points, or 0.14 percent, to 82.85. Euro/dollar futures are higher by 0.0026, or 0.21 percent, to 1.2439, above support at the 1.24 level.

A lower dollar has been generally correlated with higher stocks. If this morning's trend continues, the equity market may grind higher but will remain very sensitive to headlines.

Commodity markets are largely lower despite U.S. equity strength. Front-month crude futures are reacting to the Chinese economic numbers, slipping 1.06 percent to 82.28. Natural-gas futures are notably higher by more than 2 percent to 2.375.

Copper futures are lower as well, off 0.80 percent to 3.2875. Spot gold futures are unchanged after the precious metal soared on Friday.

In stock-specific news, U.S. banks are up in pre-market trading, led by Bank of America and Citigroup. Apple is up more than $2 at $563.15 after dropping to $555.88.
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Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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