FISCAL CLIFF DEBATE DOES ANY OF THIS MATTER......YES AND NO
Is there a coming stock market crash as a result of this impasse in DC? One thing that is ironic is that the actions of the people in DC pushing the FED to do things is what has caused the rally in the first place from 6500 all the way up to here. Don't they have the right to knock it back down if they feel like it? What's fair is fair?
Without the Fed we would undoubtedly be well under 8k in the DOW and possibly way lower. One thing to keep in mind with all of this is the effects of no deal are not going to be immediate in terms of the taxes and all of that. The payroll tax portion will be, but after all we are looking to punish people in these "teachable moments" anyway so why not do it?
It is as times like this that you have to rely on your technical indicators and your approach to trading. The reason to use technical analysis in the first place, is to eliminate all of the subjective calls you might be tempted to make guessing at what the news would be and how the markets will react to it. I suspect the Republicans will roll over, Boehner will cry again, BO will get over and smack talk again. This is how all the others have played out so why would this be any different?
What should scare everyone is the real irony behind all of this. We are all afraid of what will happen if things were just let be. Why are we so afraid of letting life take it's natural course? All this manipulation of everything is really getting tiring. It is possible if all this stimulus and all this other crap were pulled we would fall off economically and perhaps dramatically. Shouldn't that tell us that it is what should be done? It is proof that what we have created is not real. I have no desire to see a crash of any kind, but I do think the longer we try to stop them from happening the more we guarantee they will happen. Life has cycles like waves and we have to be willing to accept this and not always try to stop the waves we don't want.
I am still leaning to the down side here but am not completely convinced either way where the stock market is going over the next week. I could make a case for either direction and I did in the weekend commentary. It is at times like this we have to stick to our tools and let the trades happen. We know not all our trades will be good, but I will be darned if I can ever figure out in advance which one's will be good and which ones will not. If I could I would obviously skip the bad ones. I am leaning toward's this being a retracement in a down trend at this moment in the Bernanke's.
There is so much gloom and doom talk and it catches all the headlines and the search engine people, but it really does you no good to think this way. If you are really negative on things put a plan in place to cover yourself, then let it go. Obsessing over which side or the other will win this DC battle is also a waste of time and energy. I am on record as saying I think raising taxes and continuing to spend irresponsibly is going to wind up being a huge mistake, but I cannot do anything about it. I tried during the election and failed. Now it is time to trade and not get tied up in this. If it results in a huge crash it does, our indicators will give us the heads up in advance if we are paying attention like we should be.
I do think overall if the stimulus is so needed to keep us from falling that is the best argument that can be made for removing it and letting us fall. If we fell we would find an equilibrium level where we could begin to build something real again, instead of all of this falsely inflated stuff that is apparently so fragile that we are scared it will fall and break!