In the first week of December, the E-mini S&P had retraced 50% of its fall losses, almost 100 S&P points, putting traders in a holiday mood. “Growth is the key word,” says Hector Galvan, senior market strategist for R.J. O’Brien & Associates. “Technicals are loopy. We have been drawing on so much negative, that any news helps bounce things up.” In the New Year, he expects the dollar to firm and add support. “Depending on what the dollar does, we could test 1575,” he says, and support is at 1475.
“At this point it’s the apprehension before the [Dec. 12] Fed meeting,” says Larry Levin, president of Secrets of Traders. “A quarter point was the talk for a long time; now it’s a half point almost assuredly.” And, because the market is now conditioned to expect more bad news related to subprime losses, those are now priced into the market. “This market has a better chance to go up than to go down at this point,” he says.
In January, Levin expects consolidation in the 1550 to 1560 area, where the market was when the subprime news broke, and picks 1600, the October high, for a top. “That’s a good psychological level,” he says. Levin has support at 1520.