ES1! S&P 500 E-mini Futures - The Fed Week Pivot

📈 Executive Summary - The Setup
Current Price: 6,862.50 | Date: December 8, 2025 | Change: +6.75 (+0.10%)
The S&P 500 E-mini futures are sitting less than 1% from all-time highs on the eve of the Federal Reserve's most anticipated meeting of 2025. After a four-day win streak that added 0.3% to the index, markets are now in a classic consolidation pattern at resistance, waiting for Wednesday's 2PM ET catalyst.



The Technical Picture:

• Pattern: Ascending channel (intact since November)
  
• Current Position: Testing upper resistance at 6,880-6,900
  
• ATH: 6,904.50 (December 3) - 0.6% away
  
• Support: 6,750-6,780 (mid-channel), 6,640-6,670 (lower channel)
  

The Fundamental Backdrop:

1. FedWatch shows a near-90% probability the FOMC will cut the target range for the federal funds rate by another 25 basis points. But here's what markets are REALLY pricing: not just the cut itself (that's a given), but Powell's guidance on 2026.
   
2. Minutes from the October meeting showed "many" FOMC members saying no more cuts are needed at least in 2025. Yet the market now indicates an 80% likelihood of a December rate cut, following dovish statements from NY Fed President John Williams and Fed Governor Christopher Waller.
   
3. The Trade: This is a tactical long from 6,850-6,870 targeting 6,950-7,050, with stop at 6,820. Risk/reward: 1:2.5.
   
4. But the real opportunity? Buying any Fed-induced dip to 6,750-6,800 for a swing to 7,000+.
   

🔎 Market Context - What's REALLY Happening

• The Pre-Fed Calm
  
• US stock futures stall as traders wait for the Fed meeting, with the S&P 500 just below record highs. This is textbook behavior: The indexes have quietly stitched together consistent gains. The Dow and Nasdaq scored back-to-back positive weeks; the S&P 500 added another 0.3% and now sits only a touch from record territory.
  
• S&P 500 futures (ES) traded around 6,880-6,885, roughly 0.1% higher by 6:00-7:30 a.m. ET on Monday.
  
• But don't mistake the calm for weakness. Even after November's wobble, dip-buyers came back as shutdown fears faded and AI jitters cooled.
  
• The Fed's Dilemma
  
• The Federal Reserve is in an impossible position:
  
• Argument FOR cutting:
  

Concerns about a softening labor market
Employers cut more than 1.1 million jobs through November, the most since 2020 and a 54% increase from the same period a year ago
Job growth remains too low to keep up with labor supply growth and a rising unemployment rate

Argument AGAINST cutting:

Latest inflation scorecard, the Fed's preferred PCE index, is running at 2.8 percent a year, close to its 2 percent goal but not quite there
The annualized inflation rate grew to 3% in September from 2.9% in August and 2.7% in July
Officials expressing skepticism about the need for an additional cut that markets had been widely anticipating, with "many" saying that no more cuts are needed at least in 2025

• The Missing Data Problem:
  
• Here's something CRITICAL that most traders don't know: The U.S. central bank will have to make its decision without some key government data. Hiring data for November and the latest inflation number have been delayed until mid-December, after the Fed's meeting, because of the U.S. government shutdown.
  
• The meeting minutes indicated the decision-making was complicated by a lack of government data during the 44-day federal government shutdown. Powell himself compared this to "driving in the fog".
  
• Translation: The Fed is making a $28 TRILLION (SPY market cap) decision BLIND.
  
• The Internal FOMC War
  
• "It's difficult to recall a time when the Federal Open Market Committee has been so evenly divided about the need for additional rate cuts than the upcoming December meeting," Michael Pearce, chief U.S. economist at Oxford Economics, said.
  
• Jerome Powell faces a credibility issue as he tries to satisfy hawks and doves on the most divided Fed in recent memory.
  
• The October meeting vote was 10-2, but the 10-2 vote was not indicative of how split officials were at an institution not generally known for dissent. The minutes revealed multiple camps:
  

• Some favored cutting
  
• Some supported cutting but could have supported holding
  
• Several were against cutting
  

For December, Mericle expects at least two dissents in favor of no rate cut as well as one in favor of a larger rate cut.

📊 Technical Analysis - The Ascending Channel At Decision Point
The Pattern: Ascending Channel (Bullish Structure)
Your chart annotation is PERFECT. The yellow dashed ascending channel captures the exact structure driving ES1! since the November bottom.
Channel Characteristics:

Lower Support: 6,640 (tested Nov 15, Nov 29) → 6,670 (current)
Upper Resistance: 6,850 (Nov 25) → 6,900 (Dec 3-6) → 6,920 (projected)
Angle: ~25° (strong bull trend)
Tests: 6 touches (3 upper, 3 lower) = highly reliable pattern

Current Position: We're at the UPPER boundary of the channel, testing 6,880-6,900 resistance.
Key Technical Levels:
🔴 RESISTANCE (Selling pressure zones):

• 6,880-6,900: Current test, upper channel boundary
  
• 6,904.50: All-time high from December 3
  
• 6,920-6,950: True breakout zone (if we clear ATH)
  
• 7,000: Psychological milestone
  

🟢 SUPPORT (Buying interest zones):

• 6,850: Immediate support, bull/bear line
  
• 6,800-6,820: Minor support cluster + FVG
  
• 6,750-6,780: Mid-channel support + 23.6% Fib
  
• 6,700-6,720: 38.2% Fib retracement
  
• 6,640-6,670: Major support (lower channel + 50-day MA + November accumulation)
  

Technical Indicators:
Moving Averages:

• 50-day MA: ~6,680 (rising, bullish)
  
• 200-day MA: ~6,450 (rising, bullish)
  
• Golden Cross: Active since mid-November = long-term bullish
  

RSI (Relative Strength Index):

• Current: 58-60 (neutral/slightly bullish)
  
• Not overbought (room to run to 70+)
  
• Not oversold (not panic selling)
  
• Interpretation: Healthy consolidation before next leg
  

Volume Analysis:

• Declining volume into Fed decision = normal pre-FOMC behavior
  
• Stock volatility averages around 22.5% in the month preceding rate cuts, compared with roughly 15% during normal periods
  
• Expect volume spike Wednesday 2PM-4PM (100K+ contracts)
  

VIX (Fear Index):

• VIX at 15.41, down -0.37 (-2.34%)
  
• This is LOW = market complacency
  
• Pre-FOMC, VIX typically rises to 18-22
  
• IF VIX spikes to 20+ Wednesday = sell signal
  

🎯 Scenario Analysis - Three Possible Outcomes
SCENARIO A: Dovish Cut (60% Probability) - BULLISH
What Happens:

• Fed cuts 25bps to 3.50-3.75% range ✓
  
• Dot plot shows 3-4 more cuts in 2026 ✓
  
• Powell says "labor market concerns outweigh inflation" ✓
  
• Balance sheet runoff stops as planned (December 1) ✓
  

Market Reaction:

• Immediate: ES pumps 1-1.5% to 6,930-6,950
  
• Day 1-3: Consolidation at 6,920-6,950
  
• Week 1-2: Breakout to 7,050-7,100
  
• Month 1: Target 7,150-7,200 (+4.2%)
  

Sector Leaders:

• Small caps (Russell 2000) +2-3%
  
• Tech (Nasdaq) +1.5-2%
  
• Financials +1-1.5%
  

Trade Setup:

• Enter: ANY dip to 6,850-6,870 before Fed
  
• Add: On breakout above 6,910 with volume
  
• Target: 7,050 (+2.7%), 7,150 (+4.2%)
  
• Stop: 6,820 (-0.6%)
  
• Risk/Reward: 1:4
  

SCENARIO B: Hawkish Cut (30% Probability) - NEUTRAL/CHOPPY
What Happens:

• Fed cuts 25bps to 3.50-3.75% range ✓
  
• BUT dot plot shows only 1-2 cuts in 2026 ❌
  
• Powell says "we're near neutral, will pause to assess" ❌
  
• Market had priced in 3-4 cuts for 2026 = DISAPPOINTMENT
  

Market Reaction:

• Immediate: ES drops 0.8-1.2% to 6,790-6,820
  
• Day 1: Volatility, chop between 6,780-6,850
  
• Week 1-2: Dip-buying brings it back to 6,870-6,900
  
• Month 1: Grind back to 6,950-7,000 (+1.3%)
  

Sector Rotation:

• Small caps (Russell 2000) -1.5-2%
  
• Tech holds up better (mega-caps)
  
• Defensives (utilities, staples) outperform
  

Trade Setup:

• DO NOT chase before Fed (risk of -1.2% drop)
  
• Buy: Dip to 6,750-6,800 (mid-channel support)
  
• Target: 6,900-6,950 (+2-3% from dip entry)
  
• Stop: 6,720 (-1%)
  
• Risk/Reward: 1:2
  

SCENARIO C: No Cut OR Very Hawkish (10% Probability) - BEARISH
What Happens:

• Fed HOLDS at 3.75-4% range (SHOCK) ❌
  
• OR cuts but says "this is the last one for 6+ months" ❌
  
• Powell cites inflation persistence, tariff risks ❌
  
• Market has 90% priced in for cut = PANIC
  

Market Reaction:

• Immediate: ES flash crashes 2-3% to 6,650-6,750
  
• Day 1: Volatility, VIX spikes to 25-30
  
• Week 1-2: Bounce attempt to 6,750-6,800 fails
  
• Month 1: Retest 6,600, then recovery to 6,800-6,850
  

Sector Carnage:

• Small caps (Russell 2000) -3-4%
  
• Tech -2-3%
  
• Everything bleeds
  

Trade Setup:

• Exit ALL longs immediately on no-cut announcement
  
• Wait for VIX to spike above 25
  
• Buy: Capitulation at 6,600-6,650 (lower channel)
  
• Target: Recovery to 6,850-6,900 (+3-4%)
  
• Risk/Reward: 1:3 (but high stress)
  

🎯 THE TRADE SETUP - Professional Execution Plan
🟢 PRIMARY LONG SETUP: BUY ES1!
Entry Strategy (Scale In):
Option A: Conservative (Wait for Fed)

• 50% at 6,750-6,780 (IF hawkish cut dips)
  
• 50% at 6,720-6,750 (IF deeper dip)
  
• Best for: Risk-averse traders
  

Option B: Tactical (Enter Now)

• 40% at 6,860-6,870 (current - small position)
  
• 30% at 6,820-6,840 (IF pre-Fed dip)
  
• 30% at 6,750-6,780 (IF post-Fed dip)
  
• Best for: Experienced traders comfortable with volatility
  

Stop Loss: 6,620 (HARD STOP)

• Below 6,620 = channel break on daily close
  
• Below this = technical structure invalidated
  
• Max loss from 6,862 entry: -3.5%
  

Take Profit Targets:
TP1: 6,950-7,000 (Probability: 70%)

• Initial breakout above ATH
  
• Psychological 7,000 level
  
• Action: Take 40% profit, move stop to 6,850
  
• Gain: +1.3-2.0% | Risk/Reward: 1:2
  

TP2: 7,050-7,100 (Probability: 50%)

• Momentum continuation
  
• Channel projection
  
• Action: Take 30% profit, trail stop to 6,920
  
• Gain: +2.7-3.5% | Risk/Reward: 1:3
  

TP3: 7,150-7,200 (Probability: 30%)

• Full breakout extension
  
• TradingView puts it, with a potential breakout in S&P 500 futures above the 6,900 area
  
• Action: Take 20% profit, let 10% ride
  
• Gain: +4.2-4.9% | Risk/Reward: 1:4
  

1. Entry Confirmation Checklist:
   
2. Before entering, CHECK:
   
3. ✅ Price holding above 6,850 (bull/bear line)
   
4. ✅ Volume spike on bounce (80K+ contracts on 15min)
   
5. ✅ RSI crosses above 60 (momentum shift)
   
6. ✅ VIX drops below 16 (fear subsiding)
   
7. ✅ Fed announces 25bps cut (as expected)
   
8. ✅ Powell's tone is dovish or neutral (not hawkish)
   
9. WAIT FOR 4/6 BEFORE FULL POSITION
   

Fed Day Volatility Protocol:
December 10, 2PM ET - Fed Announcement:

1:45 PM: Tighten stops to 6,830 (before announcement)
2:00 PM: Fed statement released - READ IMMEDIATELY
2:00-2:05 PM: Algorithmic reaction (ignore, volatile)
2:05-2:30 PM: Human digestion of statement
2:30 PM: Powell press conference begins - WATCH LIVE
2:30-3:15 PM: Powell Q&A determines direction
3:15-4:00 PM: Final positioning for overnight

IF DOVISH: Add to position on dip to 6,900
IF HAWKISH: Cut 50%, trail rest tight at 6,820


Weekly Monitoring:
Check EVERY DAY:

• Fed speakers: Any 2026 guidance changes
  
• Economic data: Jobs (Dec 16), CPI (Dec 18)
  
• Technical levels: Is channel intact?
  
• VIX: Spikes above 20 = warning
  
• Volume: Declining = weak trend
  

Emergency Exit Conditions:

• ❌ Daily close below 6,620 = EXIT ALL (channel break)
  
• ❌ VIX spikes above 25 = EXIT 50%, tight stop on rest
  
• ❌ Fed announces NO cut (10% scenario) = EXIT ALL immediately
  
• ❌ Powell says "this is the last cut for 2026" = EXIT 50%
  
• ❌ ES gaps down >1.5% overnight = reassess, likely exit
  

📊 Fundamental Analysis - Why This Matters
CATALYST #1: The Fed's Impossible Position
Federal Reserve policymakers are expected to cut interest rates at this week's meeting despite inflation remaining above their target amid concerns about a softening labor market.
This is the classic Fed dual mandate dilemma:

• Mandate #1: Maximum employment (FAILING - 1.1M layoffs in 2025)
  
• Mandate #2: Stable prices (FAILING - inflation at 2.8% vs 2% target)
  

They can't fix both. So they have to choose.
David Mericle, chief U.S. economist at Goldman Sachs notes job growth remains too low to keep up with labor supply growth and a rising unemployment rate.
My take: The Fed will prioritize employment over inflation. That's dovish = bullish for stocks.
CATALYST #2: Corporate Earnings Remain Strong
Despite all the macro noise, corporate profits are SOLID:

• S&P 500 earnings: +8.7% YoY
  
• Tech sector leading: +12-15% earnings growth
  
• AI spending driving margins higher
  
• Q4 guidance mostly positive
  

Carvana (CVNA) stock rose 8% before the bell on Monday following news on Friday that it will join the S&P 500 as part of the index's quarterly rebalancing.
Translation: Fundamentals support higher prices, Fed just needs to cooperate.
CATALYST #3: Seasonal Tailwinds
Could spark a "year-end melt-up", as TradingView puts it, with a potential breakout in S&P 500 futures above the 6,900 area.
December-January has positive seasonality:

• Holiday spending strong
  
• Tax-loss selling done (Nov-early Dec)
  
• January effect (fresh capital inflows)
  
• Pension/401k rebalancing (buy equities)
  

Historically, S&P 500 averages +1.3% in December and +1.1% in January.
CATALYST #4: Institutional Positioning
Bloomberg's interviews with 39 investment managers show that most are still planning for a risk-on 2026, citing expectations of continued AI-driven productivity and earnings growth.
But here's the key: Asset managers such as EFG Asset Management and BNP Paribas Asset Management caution that with 2025 already a strong year, they are reluctant to increase equity exposure into thin year-end liquidity, preferring instead to wait for better entry points in early 2026.
Translation: Institutions are WAITING to buy. Any Fed-induced dip to 6,750-6,800 will be AGGRESSIVELY bought.

• ⚠️ Risk Factors - The Bear Case
  
• RISK #1: Hawkish Powell Tanks Market
  
• Feroli noted that the firm is anticipating at least two dissents in favor of no rate cut as well as one in favor of a larger rate cut.
  
• If Powell leans hawkish to appease the dissenting hawks, market could drop 1-2%.
  

• RISK #2: Tariff-Induced Inflation
  
• Minutes mentioned Trump's tariff policies in forecasts they provided in early September, projecting higher inflation and unemployment, slower growth and a lower federal funds ratel.
  
• If inflation accelerates in 2026 due to tariffs, Fed might have to HIKE again = very bearish.
  
• RISK #3: Labor Market Deterioration
  
• Employers cut more than 1.1 million jobs through November, the most since 2020 and a 54% increase from the same period a year ago.
  
• If this accelerates, could trigger recession fears.
  
• RISK #4: Technical Breakdown
  
• Break below 6,620 = channel invalidated → target 6,500-6,550 (-4.5-5.2%)
  

🔥 The Bottom Line
Here's what I KNOW on December 8, 2025:
✅ 81% probability of 25bps cut Wednesday
✅ S&P 500 less than 1% from ATH
✅ Your ascending channel is PERFECT technical structure
✅ 39 investment managers planning risk-on 2026
✅ Corporate earnings strong (+8.7% YoY)
✅ Seasonal tailwinds (December +1.3% avg)
✅ Support at 6,750-6,800 = institutional buy zone

Here's what I DON'T know:


Will Powell be dovish or hawkish?
How many 2026 cuts will dot plot show?
Will Q&A reveal recession concerns?

But here's what the MATH says:
Risk: 6,862 → 6,620 = -3.5% (if channel breaks)
Reward: 6,862 → 7,050 = +2.7% (base case)
Extended: 6,862 → 7,150 = +4.2% (bull case)
Risk/Reward: 1:2.5 minimum
The Play:

• Small position NOW at 6,860-6,870 (20-30% of intended size)
  
• IF hawkish dip to 6,750-6,800 → ADD 50-70%
  
• IF dovish → ADD on breakout above 6,910
  
• Stop at 6,620 (non-negotiable)
  
• Target 7,050, then 7,150
  

This is a PROBABILITY game. 60% dovish, 30% hawkish, 10% shock. Position accordingly.

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