Cliff Diving – Day 5

Nice stock bounce almost instantly after the four Congressional leaders emerged from their meeting with President at the White House.   “Constructive” is the word.

The S&P500 put in a bullish outside day – lower low and higher high than prior day — and closed strong.   The VIX collapsed and the Russell outperformed.    Apple, which has led the market down,  had a huge $25  reversal on big volume, which sure looks like a short-term tradeable bottom to us.

The upshot?  We remain a little more, can,  we say,  constructive on the market.  Not balls to the walls bullish quite yet, but a little more constructive in the near term.  Strong seasonals are fighting the fiscal cliff/tax increase headwinds.

We are still working on that expected value S&P500 level based on the Erskine Bowles probabilities that we promised you yesterday.


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 video and table are not observable)

This entry was posted in Fiscal Cliff Monitor and tagged , , , , . Bookmark the permalink.

2 Responses to Cliff Diving – Day 5

  1. great post – Yep the seasonals and the big down and then reversal/bounce look like this is definitely a tradeable bottom – maybe for a week or two maybe more.

  2. macromon says:

    Thanks, GFX…. Keeping it close with a quick trigger.

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