Friday, November 30, 2012

Revised Fiscal Cliff View

Having seen the market play out with extreme strength despite Washington headlines that would shake out any ordinary market, the script has changed.  It tells me that we won't get much of a dip until the fiscal cliff deal, as hedge funds are still piling in.  It is the one catalyst that keeps bulls hopeful and bears afraid of being short.  It doesn't mean we can't get a small pullback, but emphasis is on small.  I don't see SPX going below 1385 before the cliff deal. 

And it will be a watered down deal which will be celebrated for maybe 1 or 2 days, and then back to reality.  That reality is weakening earnings and higher taxes in 2013.  The bears will have to wait till early 2013 to get any meaningful downside in this market, as the buy after fiscal cliff deal money comes in at year end. 

We probably get to 1430 by early next week where we'll likely stall out but not drop much.

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