The Fiscal Cliff drama seems to have come to an end. The federal government used all the time it was allotted to come to an agreement. The ongoing tennis match finally ended with an agreement late Monday evening. With that, a small crisis is averted and prognosticators can go back to debating what would have happened without an agreement. Stay tuned for the next hot button issue, the Debt Ceiling.
The market seems to like the deal so far. The March S&P 500 settled up 37 points in the first trading session of the year. I expect a bullish tend to continue, with possible reversals of market players digest more of the specifics of the deal. The extension of tax cuts can give traders the idea that people will have a few extra dollars to invest into the market. That being said, this market could slow down quickly if it looks like the two sides continue to be far apart on the Debt Ceiling.
I’m being a bit cautious today and looking to play breakouts. If the rally falters I like going short at below the 1450 level. The market would need some outside help but it could try and fill the gap down to 1438. On the upside I like buying above 1457 if the market breaks through resistance. Be ready to grab profit on quick breakout moves in the 4-5 point range. I am expecting the market to trade in a channel from 1452-1457, with a lot of back and forth. Be careful and don’t get chopped up if you want to trade there.
Trade within your risk parameters and get off to a good start in the New Year.
THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES. A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
