As the sands of time keep slipping away from the negotiators in Washington, one cannot help but wonder what really goes on behind closed doors. A resolution in stages, which seems to be the best case scenario at this point, could look something like an immediate agreement on the extension of the middle-class tax cuts up to $210 billion while the remaining $55 billion (wealthy) would likely expire.
Mixed Bag Of Data
Consumer sentiment came in worse than expected for December, at 74.5 instead of 82. And analyst expectation was already 0.7 points down from the previous month. On the other hand the Labor Department data showed that employment numbers are on the rise, 146.000 jobs were added, signaling a slow but steady recovery and increasing confidence. At 7.7% we are now at the lowest unemployment rate since 2008, even though this number is somewhat muddled by a slightly larger group of Americans dropping out of the employment market.
The Bulls In The Markets
To get a feel for how the markets are taking this all in, all we need to do is to take a look at the charts of the major indices. Across the board we see that they have moved above their 200 DMA’s, whether we are talking about S&P (SPX), Dow Jones Industrial Average (DJIA), NASDAQ Composite (COMP) or the Russell 2000 (RUT). Even more interesting is that the majority of S&P 500 Stocks are trading above their 200 DMA with more than half trading even above their 50 DMA. In the NYSE corner we also note a growing number of stocks reaching new ‘highs’ for the year.
For those of us who follow the events surrounding the ‘fiscal cliff’ negotiations closely, nothing was more astounding than seeing the market’s reaction after Boehner expressed his frustration, that the White House had “wasted another week”, at today’s news conference. One would have expected the markets to take a pre-emptive ‘cliff’ dive but they didn’t budge. Perhaps the employment numbers are to blame for the subsequent rally. But could the market discarding negative news be another bullish sign?
Overseas Europe seemed cautiously confident on the US ‘fiscal cliff’ saga, possibly taking a note from Hollywood best tradition of happy endings. Or perhaps all it takes is a look at recent history, (think 2010 lame duck session), to know that politicians have a flair for climactic last minute resolutions. The bull (ish) market, the ‘cliff’ and closed doors. To be continued…
Things to look out for
Week ending December 14th
Tuesday: International Trade numbers. Very important for Forex and Bond traders
Wednesday: The FOMC (Fed) announcements will dominate but Import and Export Prices, EIA Petroleum Status and Treasury Budget numbers also announced.
Thursday: Jobless Claims, Retails Sales and PPI are reported along with Business Inventories and Natural Gas.
Friday: Consumer Price Index and Industrial Production round of this week’s numbers.
Week ending December 21st
Tuesday: The Housing Market Index
Wednesday: Housing Starts and EIA Petroleum Status numbers
Thursday: GDP, Existing Home Sales, Jobless Claims reports. Bond traders will watch out for the Philly Fed Survey.
Friday: Quadruple Witching Day. We will see the Personal Income and Outlays and the ConsumerSentiment Report