"Maybe Christmas, the Grinch thought, doesn't come from a store." -- Dr. Seuss
Our half-day of Christmas Eve trading is starting off slowly. Nothing much happened on the "fiscal cliff" front this past weekend as many politicians left town, including President Obama. Word is that the uncertainty may have actually impacted last-minute holiday shopping. The big question now is whether the market can shake off the gloominess created by this uncertainty.
Unfortunately the market's technical condition is also problematic. Stocks have been trending upward for nearly a month as market players have blithely assumed that the fiscal cliff would be resolved, even despite the constant public debates. The indices were chugging along quite nicely until Friday, when the market discovered that House Speaker John Boehner can't even deliver his own party. The S&P 500 is now in danger of breaching the recent uptrend line, and it won't have to go far at all to test its 50-day simple moving average.
The market will have to contend with two big hurdles this week. First, many market players are finished for the year, and dealing with the fiscal-cliff issue won't be worth their time and energy. That's especially so if there's a lack of optimistic that Washington will come up with a solution before year-end.
The other problem is that we're likely to see some pressure as folks sell ahead of expected tax hikes at the start of 2013. Every year-end period sees investors taking losses to offset some capital gains taxes, but this year the specter of higher taxes is putting even more pressure than usual on folks to take profits. That may crimp stocks that have been leaders, and it's probably partially to blame for the poor recent action in Apple (AAPL).
During the slow trading around the holidays, the hot money will typically create some speculative action in a few names. So far there have been very few pockets of momentum, but I'll be digging for a little action.
Overall it is looking like Monday will see some very slow and lackluster trading as the uncertainty of the fiscal cliff inhibits any holiday spirit. Manage those positions closely, and don't be too aggressive with trades. It is a good time to be selective and to focus on enjoying the holidays instead.