Politician speaks, market sells off, shorts cover, market closes unchanged. This is getting old.
Boehner came out throwing flames today saying the negotiations are “almost nowhere” and calling the President’s opening offer not a “serious proposal”. This caused some brief selling before the shorts had cover their fat tail.
Utilities were up over 1 percent as many are beginning to believe a final deal will only increase the dividend tax rate to 20 percent. Gold remains weak and the VIX moved up over 5 percent today.
The S&P500 is caught between its 200-day moving average on the downside and the 50-day on the upside. That probably won’t change until movement towards a deal is more visible or time begins to run out with no compromise on the horizon. End of next week is our estimate when markets start to get concerned.
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.
(click here if chart and table are not observable)