Fiscal scales
From times of peril arise great leaders. There is a unique opportunity for one person to be a hero and he will be remembered by the people for doing the right thing. The person who does what is right for the country will be remembered more than all the others combined. Such is the reward for putting country before personal agenda right now.
Do you think it’s going to happen? For one politician, the opportunity of a lifetime awaits in the next 24 hours. Do any of them have the courage to do the right thing? That’s what is at stake here.
The Santa rally ended with Christmas as my concerns for January came early as the post-Christmas period saw a quantum spike in the VIX. It’s about time! My take has been some deal would get done but even if it did, the market would find some excuse to sell. This opinion is based on the iron law that markets can’t sustain when the VIX is around 15. Now we actually have the possibility of a buying opportunity sometime in January if the VIX continues to spike.
I don’t have a crystal ball but I think something will get worked out even if it’s a temporary fix. Why? This is what we’ve come to expect from our government. In the last week we’ve gone on an incredible roller coaster as one day bears are covering based on the fact the House got called into session and the next day they come right back and sell it on the unfortunate rhetoric of gamesmanship.
If I wasn’t following the hockey negotiations so closely I might be shocked but I’ve come to expect posturing as the theme of the day. Recently, the NHL said that the 5 year contract length demand refused by the players would be ‘the hill the NHL would die on.’ As of the Thursday night, the NHL offered the players a 6th year. So much for drop dead threats. So it is that the fiscal cliff negotiations have had more drama, gamesmanship and drop dead threats than any of us will ever know. Yet as I write this, legislators still fill cigar smoke filled back rooms trying to hammer out a deal and not ruin New Year’s Eve for the multitudes. What surprises and saddens me is how the media has followed these negotiations, taking the bait at every turn.
This has been the light volume vacation week where the few get to bully the charts and that’s exactly what happened. With all the information out there, with all of the charts I’m going to look at one to guide me and take it in the near term. The SPX has pulled back from the declining upper channel and should test the lower rising channel in what could be an intermediate level triangle which has been in force since we topped in September and October. I’ll look as far as the next trend line which represents about 1370. The NDX is sitting near 2600 and the low back in November is about 2500. We could very easily get these lower tests this week. At the same time if fear does accelerate on Monday we could easily get the VIX to where it needs to be by the end of the week. My concern for January is happening now.
Next page: The good news...
The good news is the hockey negotiations appear very close to resolution. Of course it took the threat of the players decertifying their union which would be a poison pill. What does this have to do with the stock market? Everything. It doesn’t matter if its hockey, Congress or tiddlywinks, people are people and tough negotiations follow a similar route. Never forget that markets are ruled by psychology. When people get their backs pushed to the ultimate wall, someone usually cracks and a deal gets done. It just depends on who cracks. I’ll be back with a full length column next week. Happy New Year.
