This will be the last FOMC meeting of the year and it will be anything but dull. The Fed has to weigh better than expected unemployment numbers with the “We’re broke” rhetoric coming out of Congress. Frankly I’m expecting nothing to change – they will reiterate their policy and we will find out if that’s what bulls want to hear to keep the rally going.
Let’s take a look at a daily SPX chart. This is the S&P cash index. The SPX has formed a wedge on the daily chart below. A wedge is the convergence of a downtrend and uptrend. The top of the wedge is 1440 and the bottom is 1420. The SPX will break one way or the other it just needs a catalyst. Today’s FOMC announcement may be just what the markets need.
The market run up since November 16th has now put the pot odds in favor of the short side. However, the recent low volatility, monthly expiration next week, and the lackluster market action will keep the downside move fairly limited. So don’t “load the boat” on the short side.
Bigger picture I am looking for the November lows to fail, but look for that in February. Stay tuned.