Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Tuesday, January 1, 2013

Difficult Half of Fiscal Cliff Postponed to Late Feb

Stock Market Technical Analysis Blog

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The agreement to be voted on today would raise taxes on couple's income over 450k, extend unemployment benefits, and postpone the dreaded across the board spending cuts battle until late Feb.  The 2% payroll tax increase starts coming out of everyone's check this week.  Geithner found a small program they can stop funding for 2 months to allow postponing the debt ceiling battle until late Feb also.  This essentially sets up a double fiscal cliff for late Feb.

In the first row of charts above I have posted year, quarter, month and week candles of the S&P 500 as all four completed last night.  In the second cluster we see that the Nasdaq has almost made it up to the blue incline channel and the VIX briefly came down into the blue channel but closed at the top line.  In the third chart cluster, the SPY closed right up underneath the lower line of its 18-month uphill blue line channel.  APPL reentered the upper half of its 2010-11 black line channel.
  In the next cluster, the upper six charts show the sentiment EMAs on the Weekly bars charts of the indexes with the Nasdaq essentially neutral, the S&P and DOW slightly bullish, the VIX morphing into a merge after the upcross on Friday, and the TLT (Bonds ETF) at a slightly bearish merge.  The candles below it show the engulfing Day candles on the indexes and the VXX.  In the last cluster the VIX fell almost back down to the red sentiment EMA on the daily chart.  Beside that we see that AAPL closed yesterday right up at its gold Day 324 EMA line which will be a real test for it tomorrow.  Once again, they bounced AAPL up from the Day 432 EMA at the open yesterday to give them the broad market lift that was really needed yesterday.  The seven charts below that are the short term channels on the indexes.  Most notable is the Nasdaq barely regaining its Nov/Dec channel, AAPL breaking out of its Dec downhill channel, VIX well back down into its channel, and the problematic UUP (Dollar Index) still rising.

Looking forward to the first five trading days of the New Year which Wall Street almost always tries to drive the market up as they are historically an indicator of how the year might go also.  It would be reasonable to expect that these first five days might be upward but when the media starts focusing on the late Feb agenda the market could turn ugly as that is the real battle, as what they are voting on now is essentially what was assumed would be agreed on all along, and is the easy part, they just had to go through the political posture bargaining process to narrow down to the final numbers.


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