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So the Santa Claus rally has the market flirting with the October highs and everyone is anxiously awaiting the January effect. Will the market bust through major resistance and test the mid year highs, or retreat into the much publicized trading range that has held since August? Perhaps making this area 1250 (March futures) as support in an expanded trading range up to the 1350 level.
The bulls will tell you that the European situation is all but solved. And even if it is not, where is a better place to have your money than in the US during an election year. Like there is going to be a huge spike in interest rates now or ever? Not to mention earnings that are going to blow away revised downward estimates. Finally, all the cash on the sidelines, that has been getting whipped like a red-headed stepchild since 2000, has to go somewhere.  In fact, several of the major components of the Standard and Poor’s 500 Index are already trading at or above their October highs (XOM, IBM, MSFT, CVX, JNJ, PG, T, GE and KO). Not to mention CVX and IBM hitting recent all times highs in the past few weeks.
The bears will note that the European situation is not resolved nor will it ever be. There simply has not been enough focus on how far we are from a resolution. In other words, the negative reaction in the futures markets overnight has been muted. Also, how much higher can the market go without some boost from the financials, as many are trading dangerously close to their 2009 lows. Also, how much upside is there still to be had in
Big Mac’s and Ipads? 
With earnings season on the horizon, is the market destined to breakout of the 1243-1280 range that has held since December 28? At this time, it sure seems to be leaning toward the upside breakout as opposed to the downside. Nevertheless, let’s not guess and let the numbers tell us. My numbers are telling me three closes below 1250 (March futures) we are going south, three close above 1280.00 (March futures) and we are heading north.