While there are shades of last summer's fiscal cliff in today's actions it is worthwhile to keep things in perspective. There was a sizable gap up to begin the week on a move by Speaker Boehner over the weekend to budge on tax increases for some people (>$1M). Then Obama gave in on the income threshold, moving it up from $250K to $400K. (Yesterday he mentioned that could go up to even $700-$800K) Whatever the negotiations, there was a substantial two day move early this week on anticipation of a deal sooner or later. This morning the market is gapping back down to fill that gap up. So it's come full circle in four days and we look to open just about where the market closed last Friday.
With that said, this sharp pullback pushes the major indexes back down below their respective necklines which the early week move had helped breach. Lucy pulled the football away from Charlie for the second week in a row. Hence, the near term has become much more muddled than it looked at the close yesterday. So now we'll observe if these indexes can get back OVER these necklines for a third time.
On the "positive" side the market had been lining itself up for a sell the news reaction as a deal has become priced in. Now that would seem less so. So now we see if the folks in D.C. try to make one last attempt before the end of year or if the fiscal cliff (not really a cliff but a slow long slide) hits on Jan 1, and then they come to do a deal after the New Year when the GOP can vote on a deal without having to officially "raise taxes" since they will then be voting for a tax cut after everything reverts back higher.
There is some economic news this morning but it is completely ignored of course. Boehner speaks at 10 AM but being effectively neutered not sure what he can say of substance.
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