S&P futures closed sharply higher on Monday in the wake of news the government would bail out Freddie Mac and Fannie Mae but are mixed in early trade. The September futures moved above 1278 Monday, which marks the 20-day moving average and key resistance, but profit-taking took back some gains by day’s end.September S&P futures were last trading down 4.50 at 1262.50.

Senior Market Strategist Jeff Friedman said technical momentum indicators, Stochastics and the Relative Strength Index (RSI), are neutral to bearish, signaling caution about Monday’s action. “We need multiple closes above the 20-day moving average to put the bulls strongly back in command,” he said. “If this (Fannie/Freddie rally) only lasts a day and a half, then look out below.”

He says to look for resistance at 1291 in the September contract, followed by 1304-1306. The market needs to close firmly above those levels to signal the bottom is in for 2008, said Friedman. If September resumes last week’s decline, he said the July low of 1201 would be the next downside target.

For day traders, he see the market as bullish to neutral today, but expects choppy trade with the bulls and bears “fighting it out.”