The SPDR S&P 500 (SPY  ) was spiking about 0.6% higher Monday despite the President of the Cleveland Fed Loretta Mester issuing a warning that the recent market rally, prompted by heightened hopes of imminent rate cuts, is premature.

Mester's sentiment on the central bank slashing borrowing rates early in 2024 echoes two other members of the Federal Reserve Open Market Committee but Goldman Sachs' chief equity strategist, David Kostin, sees the Santa Claus rally continuing into next year, based on the Fed's recent shift in tone.

Kostin bumped the year-end target for the S&P 500 index in 2024 to 5,100, reflecting a 7% rise from its current level and an increase from the earlier target of 4,700. The new price target suggests the S&P 500 and the SPY are headed to end next year at a new all-time high.

From a technical analysis perspective, the SPY could be headed to a new all-time high over the coming weeks because on Monday, the ETF was attempting to break up from a bull flag pattern on the daily chart.

More experienced traders who wish to play the SPY either bullishly or bearishly may choose to do so through one of two Direxion ETFs. Bullish traders can enter a short-term position in Direxion Daily S&P 500 Bull 3X Shares (SPXL  ) and bearish traders can trade the inverse ETF, Direxion Daily S&P 500 Bear 3X Shares (SPXS  ).

The ETFs: SPXL and SPXS are triple leveraged funds that track the movement of the SPY, seeking a return of 300% or -300% on the return of the benchmark index over a single day.

It should be noted that leveraged ETFs are meant to be used as a trading vehicle as opposed to long-term investments.

The SPY Chart: The SPY's bull flag was formed between Dec. 6 and Monday, with the upward-sloping pole created between Dec. 6 and Thursday and the pole forming on Friday and possibly Monday. The measured move of the pattern, if the SPY continues to break up from the flag on higher-than-average volume is about 4.2%, which indicates the ETF could be headed toward the $487 mark.

  • The SPY is trading in a confirmed uptrend, making a series of higher highs and higher lows. The most recent higher high was formed on Thursday at $473.73 and the most recent higher low was printed at the $467.43 mark on Friday.
  • Bullish traders want to see big bullish momentum come in and break the SPY decidedly up above Thursday's high-of-day and then for high volume to push the ETF toward the previous all-time high of $479.98.
  • Bearish traders want to see big bearish volume come in and drop the SPY down under the eight-day exponential moving average, which would negate the bull flag and likely accelerate downside pressure, at least temporarily.
  • The SPY has resistance above at $473.54 and at $479.98 and support below at $467.15 and at $466.67.