Right now we know that we aren't on track for a resolution. Time, distractions (Petraues), rancor, they are all against a deal. There is no move to rise above yet.
That means every time someone comes on television you can expect the market to go down. Don't trust any initial bursts of optimism before or after a soundbite unless it is from both parties at once standing at a podiums saying "we have a deal." Use yesterday as a template. When you see or hear about a presidential event, be ready.
We will know when we are close to a deal or when we are done going down because the fiscal cliff is now "in " or fully discounted in the market. That's when we don't go down within the hour after a speech. That's it. That's what's been my indicator in all of Washington's impact on the market over a 30-year period. If we stop going down on talk, then we are at a bottom.
Second, we have the purest of pure plays out there in Lockheed-Martin (LMT). It is total canary in a coal mine. It's a good company, despite the recent management upheaval, with an outsized 5% yield that will be worth much less after taxes after December.
It got hammered yesterday, as it should. It will be right in the cross hairs of the government's crosshairs and the fact that it is up 8% for the year is totally absurd if we are going to go off the cliff. This one should be front and center at the upper left on your screen. It might as well be the thermometer for the market and it is a perfect one.
The third? Lets call it the Cisco, Home Depot and PetSmart indicator. These are the three biggest upside surprises since the election and the correctly capture discretionary retail, housing and technology spend. If these stocks cannot hold their gains, no stocks can right now except higher-yielding stocks that are regarded as recession proof, like Coca-Cola (KO), Kellogg (K), General Mills (GIS), Verizon (VZ) and AT&T (T).
