Next week, we will have the last FOMC for the year, when nearly everyone is expecting a rate cut of 25 base points. So what will happen for the market for this important week? Here is an analysis I have seen that outlines two possible scenarios for the S&P 500 Index with December and January in focus based on the famed Elliott Wave theory...
Notice I've marked the next set of important dates with the red vertical lines – this week, the Federal Reserve meeting next Wednesday, and into/around Christmas.
With the red swing line, there wouldn't be much of a pullback, and the index would drift higher over the next four to six weeks (maybe longer). It would be a low-volatility environment, which wouldn't be a big surprise considering how the bull market has acted since the April lows.
The blue swing line is the preferred setup for call options... It would be a wave (1) high this week with a drop into a wave (2) that holds the recent lows and explodes higher into a wave (3) into January.
It's worth mentioning that the recent lows must hold for either of these scenarios to remain intact.
You probably can already guess which one I will vote for. Yes, the blue scenario. While I still expect a decent year-end Santa Claus Rally, I do believe we will likely see a decent selloff first. At DW Family, we have taken too nice gains today and is opening a short trade to bet on some weakness next week. Will be interesting to see what is coming next week😀😇
