In just over three weeks, the S&P has managed to pick up better than 5% completing a 61.8% Fibonacci retracement. As you can see from the chart, it appears prices have stalled just under the down-sloping trend line they've been below since the beginning of October.
The Near Term
Some of my clients are lightly positioned in bearish trade and currently under water. How we have chosen to attack this market is short March futures (ESH13) while selling out of the money puts 1:1. My stance is that investors big and small will be liquidating in the very near future to book profits and lighten up considering the tax ramifications could be much worse next year. If a resolution on the fiscal cliff is reached in the coming weeks we could see prices trade north back to levels seen in the latest months but I do not see that as a likely scenario.
Another consideration is the FOMC meeting this week and what Uncle Ben and his cronies will do which at this juncture I do not think is much. On talk alone hopefully traders will not buy into jargon and force real action or even better allow the market to trade on its own merit. I anticipate the Fed to disappoint. As for my target between now and the end of the year I am expecting a deprecation of 3%-4%.