StockCharts Messages – 12/22/12

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MARKET MESSAGES

MERRY CHRISTMAS & HAPPY HOLIDAYS TO ALL

12/22/12 – SAT

Mike Burk said today: “Seasonally, for the remainder of the year, the market typically rises on low volume.”  I wonder if that is going to be true with Congress in a do nothing mode??  Hope springs eternal.

Previously when I said things should be quiet on Thursday and Friday, who knew the republicans were going to kick the can over the cliff?  The reaction immediately in the overnight futures market found the SP futures down 24 points (equivalent to about 220 Dow points).  The market recovered half of that loss during the day.

Today it’s all about brinksmanship and seeing who will blink first in Washington.  It wouldn’t be surprising if we go into next year with no agreement.  After we’re about 7-10 days into the new year, I would think somebody would blink.  But with both parties in a combative war with each other, who really knows??  Wall Street will be really pissed with a token agreement.

Remember the aftermath in 2011 with Congress not raising the debt ceiling or agreeing on a method of dealing with our debt problems?  In August the US received a lowered bond rating and Wall Street lost confidence in the government’s ability to govern.  The market continued into a tailspin long after Congress had agreed to raise the debt ceiling and kick the can down the road.  The SP 500 lost 290 points (21%) from May into October 2011.  It wouldn’t be surprising if an identical situation develops on Wall St over the present fiscal cliff, meaning another tailspin after the agreement.  But maybe Congress will surprise us and reach a real agreement that makes a good attempt at our debt problems.  In that case Wall Street might not sell off.  We shall see.

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