SPDR S&P 500 ETF

First and foremost, it makes sense to take an updated look at what's going on with the market. In last week's column, I highlighted the SPDR S&P 500 ETF ( SPY) as a proxy for the broad market -- and a lot has changed since then.

Last week, the S&P 500 was in the middle of a minor correction, pulling back to the 50-day moving average in what many saw as a bearish move. But a longer-term look at a chart of SPY made it clear that the market was just showing traders a pretty tepid correction in the context of a bigger primary uptrend.

This week's rally is significant -- it broke SPY out of the fiscal cliff-induced derailment you can see in the chart above. More significant, it brings it up to a test of current resistance just above $145 for the ETF. If we can get a confirmed breakout above that level early next week, traders can expect to see a lot more upside in January. After all, thanks to high correlations with the S&P, a rising tide tends to lift all ships with this index.

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