* LATEST MARKET DEVELOPMENTS *

The highly anticipated U.S. Federal Reserve Open Market Committee (FOMC) meeting begins Tuesday and ends Wednesday afternoon with a statement. Recent upbeat U.S. economic data and last week’s U.S. government budget deal suggest the Fed will move up its timeline for implementing a tapering of its monthly bond-buying program, also called quantitative easing—possibly as early as this week. A growing number of market watchers think the Fed will indeed announce a tapering this week. However, there is no clear consensus on precisely when the Fed will make its move. Many traders and analysts reckon the actual announcement of the Fed tapering will cause high volatility in markets. While market prices could gyrate a bit in the immediate aftermath of the announcement, I don’t think markets will experience unsettling high volatility. Reason: Traders and investors have had many weeks to digest and factor into market prices the near certainty that the Fed will taper at next week’s meeting, or early next year.

In overnight news, reports in the Euro zone showed inflation remains extremely low and almost to the point of being problematic. European Union consumer prices fell in November, while the overall inflation rate inched up to 0.9%, on an annual basis. In the U.K. the rate of inflation in November fell to its lowest level in four years, at 2.1% on an annual basis.

The important German ZEW economic expectations survey was released Tuesday and handily beat expectations. The December reading was 62.0 versus 54.6 in November. A level of 55.0 was expected. Germany is the economic work horse of the European Union.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson-Redbook retail sales reports, the NAHB housing market index, real earnings, and the consumer price index.

Wyckoff’s Daily Risk Rating: 6.0 (Wednesday afternoon’s FOMC meeting results ratchets up the risk in the market place ahead of that development.)

(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 10, with 1 being least risk-averse (most risk-on) and 10 being the most risk-averse (risk-off), and 5 being neutral.

–Jim Wyckoff

U.S. STOCK INDEXES

S&P 500 futures: Prices are near steady in early U.S. trading. The shorter-term moving averages (4-, 9- and 18-day) are bearish early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at Monday’s high of 1,786.20 and then at 1,800.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at 1,770.00 and then at Monday’s low of 1,755.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.0

Nasdaq index futures: Prices are near steady early today. The shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is below the 9-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is located at Monday’s high of 3,491.25 and then at 3,500.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,463.75 and then at 3,450.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0.

Dow futures: Prices are slightly higher early today. Buy stops likely reside just above technical resistance at Monday’s high of 15,875 and then at 15,900. Sell stops likely reside just below technical support at 15,800 and then at 15,750. Shorter-term moving averages are bearish early today, as the 4-day moving average is below the 9-day. The 9-day moving average is below the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are neutral early today. Wyckoff’s Intra-Day Market Rating: 5.5

U.S. TREASURY BONDS AND NOTES

March U.S. T-Bonds: Prices are firmer early today on short covering. The bears still have the overall near-term technical advantage as prices are in a two-month-old downtrend on the daily bar chart. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at 129 24/32 and then at 130 even. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 129 10/32 and then at last week’s low of 129 2/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5 March U.S. T-Notes: Prices are higher early today on short covering. Shorter-term moving averages (4- 9- 18-day) are still bearish early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term resistance lies at Monday’s high of 124.16.0 and then at 124.24.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at last week’s low of 124.03.5 and then at 124.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5

U.S. DOLLAR INDEX

The March U.S. dollar index is slightly higher early today, on tepid short covering. The greenback bears still have the overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at Monday’s high of 80.370 and then at last week’s high of 80.570. Shorter-term support is seen at the overnight low of 80.135 and then at last week’s low of 79.875. Wyckoff’s Intra Day Market Rating: 5.0

NYMEX CRUDE OIL

January Nymex crude oil prices are slightly lower early today. Bulls still have the slight overall near-term technical advantage. In January Nymex crude, look for buy stops to reside just above resistance at Monday’s high of $97.69 and then at $98.00. Look for sell stops just below technical support at $97.00 and then at $96.50. Wyckoff’s Intra-Day Market Rating: 4.5

GRAINS

Markets were mixed but near steady overnight. Grain markets are suffering from a lack of export demand for U.S. grains. Also, the South American soybean and corn crops are looking good early in the growing season. Technically, corn and wheat futures bears are in full control. Soybean bulls have the near-term technical advantage.