Financials and homebuilders led the market higher as optimism for a fiscal cliff deal builds. A second meeting between President Obama and Speaker Boehner as well as some new proposals helped to convince market players that a deal is in the works.
What is particularly odd about the market right now is that nothing else really matters than this fiscal cliff. Earnings, Europe and the economy are all secondary concerns of little consequence that we aren't even going to think about until this one issue is finally decided.
The main question that traders are debating is whether the recent strength is setting up a "sell the news" situation. That may ultimately be the case, but I would not want to be short when the news hits. I believe we'll see a pretty good upside move if there is a clean deal, and I expect to see plenty of chasing as underinvested bulls try to catch up. Throw in the fact that many fund managers are lagging and need some performance into the end of the year and the conditions will be ripe for some frenzy if the fiscal cliff deal is done. The market is anticipating it, but that doesn't mean it is priced in.
The big challenge is putting money to work. Many investors (including myself) are struggling with that, which is another reason this market has the potential to go crazy on a deal.
Have a good evening. I'll see you tomorrow.