So what can possibly create a real bear to manifest if the fiscal cliff is solved? Well, they have a situation brewing in the Middle East. Right now, it’s on the cusp of escalating although it does appear all sides; even Egypt is playing damage control. Then again, you never know what will happen because December is the time the whole world has been waiting on that Mayan calendar business. Let me just say I’m not an aficionado of the end of the world. I don’t buy any of it. Those of you who’ve been following my work know I don’t subscribe to any doomsday scenario. But we’ve heard about December 2012 for years and within a couple of months we did have that once in a lifetime storm hit the Northeast. I find it kind of strange. But let’s stick to our work. With a VIX as low as it is, this is developing into bear market psychology. In bear markets the surprises are always to the downside. I have no idea what is going to happen, I just don’t like what I see in terms of sentiment for the bigger picture.
So it’s a short week and might even be shorter given light volume. It’s the perfect week for a bounce. Finally, oil is sitting at an important inflection point and if you’ve noticed, with a skirmish in the Middle East, we have yet to see a rise in prices. What that means is traders are still fixated on the fiscal cliff. With the Chinese SSE sitting at a double bottom we also need to see support come in there if any bounce is to be sustainable.