Once again this multi-month S&P 500 (chart) trading range of 1100 to 1265 territory has held true to form and the technical traders are seemingly outperforming the fundamental investors. Three times this week the 1265 level on the S&P was tested and ultimately failed to breakout. However, positive developments out of Europe today sent the markets higher and once again the S&P 500 (chart) is approaching the 1265 level which is also its 200 day moving average. As long as there are no further tape bombs coming out of Europe, I believe there is a strong possibility that in the near future we can potentially break out of this ever tightening trading range. But this is a big “if”. We all know by now the European debt crisis is far from over, but at least there seems to be some accord happening from across the pond.

I am also encouraged about the improving economic environment that is occurring here in the U.S. According to reports released this morning, consumer confidence has reached a 6 month high and our country’s trade gap is also narrowing, which is bullish for the economy. On the week, the Dow Jones Industrial Average (chart) closed up 186.56 points, the Nasdaq (chart) +50.47, the S&P 500 (chart) +20.84 and the Russell 2000 (chart) +22.72 points.

I, along with thousands of other traders will be keeping a close eye on a potential breakout above the 200 day moving average or the 1265 level on the S&P 500. My real preference is a breakout above the 1280 zone in which it last traded there in early November. That to me would be the true breakout point for a potential Santa Claus rally into year end. Good luck to all.

Have a great weekend 🙂

~George