Here’s Where The Focus Will Be Today

December 9, 2003
Chris Curran

The December

SP 500 futures opened the week with a small gap
down to Friday’s lows after a tight overnight range. With a strong opening for
the Banking Index (BKX), the futures quicky filled the opening gap, but then
went off in their own world for the next 4 hours to chop in a narrow range and
fade the BKX strength. The price movement was characteristic of shorts being
sucked in, with a couple of slow slides down to the 1,060-61 area followed by
sharp snaps back up. The price action paid off as shorts covering going into
the last hour helped the contract to break out to new session highs. The narrow
pullbacks and subsequent buy stops getting hit continued into the close.

The December SP 500 futures
closed Monday’s session with a gain of +6.75 points, and finished in the upper
1/2 of its range. Volume was estimated at 498,000 contracts, which was behind
Friday’s pace and below the daily average. Looking at the daily chart, the
contract posted a key reversal up off of its 10-day MA and 38% Fib retracement
of the 11/21-12/3 up move to form a bull flag. On an intraday basis, the
60-min, 30-min, and 13-min charts all closed with cups and handles, and combined
with 3-min closing divergence, have room to pull back to the 1,065-64 area.

Tuesday morning gives us the Wholesale
Inventories report at 10 am ET, with a consensus for a 0.1% increase (remember
that higher inventory reports are considered bearish). The focus of the
session, however, will be the 2:15 pm ET FOMC meeting announcement. While rates
are expected to be left alone, all eyes will be on the “Greenspeak” to see if
the tone is changing about keeping rates low for a “considerable period of
time.” Historically, the bias has been bullish ahead of the meetings, but trade
what you see and not what you think should happen. And, as always, be flat for
the announcement.