S+Ps had a breakout setup today-a narrow range and a doji bar on Friday. Today I am looking for a directional move out of that setup. This is a bit of an anomaly ahead of tomorrow’s FOMC meeting, as you might expect traders to be trading cautiously ahead of such an important event, but the fact that the market is rallying in spite of this (and in spite of the $10 bln. writeoff announced by UBS) is telling for the Santa Claus rally. Fed Funds futures are currently pricing in a 76% chance of a 25 bp cut tomorrow, the remainder on a 50 bp cut.
Given the breakout setup, I was looking to buy a break above Friday’s high (1515.250 or sell a break below Friday’s low. The high was taken out early, and Spoos also took out Fib resistance around 1518. There’s psychological resistance at 1520, then look for 1526.
