Cliff Diving – Day 11

Resilient.

After last week’s low volume ramp, stocks were prepared to be flogged by the bears.  Two hours into trading and a 10-point flop in the S&P500,  the selling dried up and, led by Apple (+ 3.15 percent),  stocks began to move up to close at their highs.   The S&P500 (SPY) was down 0.21 percent.  The Russell 2000 (IWM) was up on the day.

Defense and utilities were in the green, the dollar and gold flat, and bonds up about 1/2 percent.   The VIX rose 2.38 percent.

Still no panic as the rhetoric begins to heat up.  The fact the market is rebounding has taken some heat off Congress and the Administration and even emboldened some to think going over the “cliff” won’t be so bad.

There’s only a short window before the sellers come back,  in our opinion.   Let’s use December 7th as the day of infamy.

The special interests are starting to crawl out from under the table as their babies are under threat.  Listen as to the National Association of Realtors as they hear that the mortgage interest deduction may now be on the table,

“Until Congress introduces specific legislation, there’s nothing to say about any proposed changes to the mortgage interest deduction,” Gary Thomas, president of the National Association of Realtors, said in an e-mailed statement. “However, it has always been the N.A.R.’s position that the mortgage interest deduction is vital to the stability of the American housing market and economy, and we will remain vigilant in opposing any future plan that modifies or excludes the deductibility of mortgage interest.”

–  NY Times, DealBook

How is thing going to get done in the next month?   Do you believe in miracles?

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) 

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

1 Response to Cliff Diving – Day 11

  1. ngenghou1962 says:

    There is going to be a lot of tough bargaining in between before everything is finalized and this will cause volatility in the short run. There is also lack of near term catalyst in the form of poor corporate earnings outlook.

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