A news blurb around 3:30 p.m. EST that President Obama and Speaker Boehner will meet today at 5 p.m. provided a good illustration of how the only thing that matters in this market right now is the fiscal cliff. It had been a dreary session on a number of pessimistic comments about the negotiations, but news of the meeting brought in buyers quickly.
The big problem for the bears is that until we actually hit the deadline, there is the potential for a fiscal cliff-deal at any time. You can't be comfortable with shorts because a headline about a meeting is enough to cut the intraday losses in half. If there's news of actual progress, it's likely to cause a downright frenzy.
On the other hand, the upside is not without substantial risk. If the bulls' optimism proves wrong and the fiscal-cliff debate drags on past Christmas, this market is going to become very rocky, very quickly. What further complicates matters is that the strength has been tepid and lacks buyable momentum. Stocks are holding and drifting upward. but it isn't a rally marked by big accumulation.
The bulls are hoping that President Obama has his golf clubs packed and is eager to make a deal so he can leave for his vacation in Hawaii. All the politicians want to leave, and they are going to push hard to get this done. We'll have a problem if it drags out for another week, but in the near term, the potential for a positive surprise is high enough that I wouldn't touch a short right now.
I don't think we'll see a deal tonight, but we will have some clues as to whether any progress is being made.
Have a good evening. I'll see you tomorrow.