This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Santa Claus Takes Up Cliff Diving

NEW YORK ( TheStreet) -- I may have the contrarian opinion on impact of fiscal cliff, but the stalemate in Washington has ended the Santa Claus rally that began from the market lows of Nov. 16.

Strength from Nov. 16 into Dec. 18 can be attributed to the anticipation that a deal to prevent the fiscal cliff could be reached so that Santa would not be forced to take up cliff diving. Today the odds of getting a meaningful compromise have declined significantly and in my judgment a cliff deal that simply kicks the can down the road is not what investors, businesses and consumers are looking for. Going off the cliff is not priced into the stock market, and a weak compromise deal has already been priced into recent market strength.

Going off the cliff establishes the discipline forced by the Budget Control Act that takes effect as 2013 begins. This law calls for across-the board spending cuts to many discretionary programs, and specifies that the Bush-era tax cuts expire. In my judgment, a stock market sell-off would be healthy given overvalued fundamentals and deteriorating technicals. I would not be surprised by significant market downside similar to the bear market seen at the end of 2008 going into March 2009, but not that severe.

On Thursday we learned that consumers on Main Street agree with my way of thinking. The Conference Board's reading on Consumer Confidence plunged to 65.1 in December from a downward revised 71.5 in November on worries about the fiscal cliff. This puts the index significantly below the 90 to 110 neutral zone you can observe on the chart provided by -- Advisor Perspectives .

Today's weekly closes and Monday's year end closes set the stage for the risk/reward parameters for 2013. The keys today are weekly closes relative to the five-week modified moving averages, the most important being 13,106 Dow Industrials, 1415.1 S&P 500 and 2991 on the Nasdaq.

Monday's year end closes for the U.S. capital markets are inputs to my proprietary analytics for calculations of new monthly, quarterly, semiannual and annual value levels, pivots and risky levels. For equities it appears that the downside risks presented by my new levels will exceed the upside potential for equities regardless of the fiscal cliff and ultra loose monetary policy.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SOXX $90.63 0.00%
AAPL $117.81 0.00%
FB $105.45 0.00%
GOOG $750.26 0.00%
TSLA $231.61 0.00%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs