Looking for Strength into the FOMC Meeting

I first envisioned a correction leading to the employment report and the Fed meeting. Instead, the market spent the last days in a 10 point range.

The behaviour of the put/call ratio (chart below) makes me think that the break-out will be to the upside. Also contributing to this view is the generally bullish bias leading to the FOMC meetings. The up move will probably culminate in a climax that can be sold for a correction after the Fed announcement.

For a target, I am looking at the 1155 level on the cash index, as projected previously.

The employment report has a big influence on the short term direction of the market. There is a big probability that it will continue the positive tone on the economy set by the reports in the last two weeks. If this happens the market will probably gap up. This will be a difficult situation because a lot of courage is required to buy a gapping up market for the prospect of immediate continuation. I will try to do my best.

However, I will be picky with this trade. For example, a not so good employment report or no opportunity to buy on some weakness will make me sit on the sidelines.

Looking at the recent range in the S&P index I think the 1125 level is important to watch (green line below, click to enlarge). It separates the bulk of the range from some break-out attempts. For the bullish case to hold I would not like to see the market trade decisively below this level.

chart source: SaxoBank