These issues are playing havoc with several traditional trading strategies for this time of the year. Normally, now is when you would see some selling for tax loss purposes. The second half of December you often see traders picking on the losers, the classic "Dogs of the Dow" strategy.
There are some modest signs that this may happen. Beaten up sectors like railroads (CSX, Norfolk Southern, and Kansas City Southern), and especially utilities (Duke, American Electric Power) are either up or down fractionally today, giving some hope that those sectors may be close to washed out.
But the Federal Reserve is such a giant millstone around the market that it is difficult to make these kinds of calls with any certainty.
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How much of a millstone? Look at the CBOE Volatility Index (VIX), which hit at a two-month high at 23.49. The VIX futures contracts for the next several months are all much lower: December is at 22.75, January at 20.86, and February at 20.75. All of those contracts reflect activity after the Federal Reserve meeting on Dec. 16. The cash contract — what we call the VIX — reflects expected volatility one month ahead and so it includes the Fed meeting.
It's very unusual for the cash contract to be higher than futures contracts several months out. This is a reflection of anxiety around the Fed meeting!