S&P 500 Index Futures forecast for the week of December 3, 2012, Technical Analysis

The S&P 500 Index futures had a range bound week over the last five sessions, in order to simply sit just above the 1400 level. The markets are without a doubt pay attention to the ongoing talks in Washington DC, and as long as the so-called “fiscal cliff” is still in the headlines, this market will be very volatile.

With that in mind, we do know that is obviously in an uptrend, so we have to favor buying overall. However, there is going to come a time in December that traders will simply get sick of arguing whether or not Congress is going to come up with some type of solution, it simply selloff the market. When that happens, Congress will be brought back to its senses. Sadly, it’s very likely that until that happens the markets will still be left waiting for Congress to act on some type of deal.

Every once in a while, you have a situation where the market will make the Congress move. The last time we saw something like this, the TARP deal, we sell the markets lose 9% in one day in order to wake DC up. It’s possible that we may see another situation like that, as the markets simply move Congress and seventh Congress moving itself. Nonetheless, there will be some type of resolution, or we will have a massive fall late in December.

Working under the assumption that Congress will do something, even if it’s just the kick the can down the road, it does look like this market once to grind higher and challenged the 1450 level again. That area looks like resistance to us, and we think that a move above that would be a very strong signal to start buying hand over fist.

As far as selling is concerned, 1350 is our line in the sand. If we can get below that level on a daily close, we would be more than willing to start selling the market off at that point. Until then, selling just is not going to be an option.