Cliff Diving – Day 18: Can Kicks Back

Image_Cliff Dive

Lots of divergences today.

The markets caught a bid on China’s Shanghai catching a bid from nowhere.   The Shanghai was up close to 3 percent and off a three year low,  which had the index down 11 percent for the year and almost 70 percent from its 2007 high.

Both sides on the fiscal cliff seem to be digging in.  The House took off for the weekend and President Obama plans to jet off to Hawaii on December 17th for the holidays.   Either something is cooking behind closed doors, which the market seems to sniff,  or the cliff beckons,  which is not priced.  Place your bets.

The S&P500 was all over the place finding support at around 1398,  rallied, sold off, to close up a few points.   The Russell was down.  The Nasdaq was down almost 1 percent on Apple’s huge flop,  The Dow was up 82 points with the help of the banks as the financial ETF closed up 1.21 percent.  Note financials have been hit the hardest since the election.

The VIX was down almost 4 percent after climbing the prior two days.  Gold down a few bucks and the dollar unched.

The end of the week.  That is when we hit the panic button.

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.

Dec5_FCM

(click here if video and table is not observable)

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