No politician, no cry.
The President is out of country and Congress is not in session. Though Speaker Boehner tweeted a cheeky remark about where’s the President’s spending cuts, all was quiet at the edge of the fiscal cliff. We do share his concerns.
As we suspected on Friday, the market followed through with an impressive up move. Apple led the market with a more than 7 percent move higher. The S&P5oo (SPY) closed 1.78 percent higher and the Russell 2000, once again, outperformed. Looks like the big bounces were in those most oversold.
The VIX is now down over 13 percent since the election. Gold is starting to move on the back of QEternity coming to Japan and expectations the Fed will move with more QE to offset the coming fiscal drag in the U.S.. Watch gold’s 50-day moving average at 1741, which has been resistance. We’ll buy on the breakout.
We don’t know how long this good feeling will last. The seasonals are positive but hardball negotiations have yet to begin. We also sense the market wants a decent deal and will sell hard and turn a can kicker into a real ass kicker. Stay tuned.
What would a real fiscal cliff panic look like?
Stocks down hard; Russell 2000 down harder; consumer discretionary down hard; gold up; dollar down; VIX spiking; and defense stocks in the tank.
Bonds? Tough to extract a clear signal with the Fed’s financial repression, but, initially, the cowboys would most likely be in buying on recession fears and increased worries about going over the cliff.
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