After some panic Friday afternoon, market players are feeling more optimistic about a fiscal-cliff deal this morning. The problem is that they have done a terrible job of anticipating a deal and even if the Senate can come up with a compromise, the big hurdle will be passing a bill in the House. We probably don't even have a time for a vote today unless something happens in the next hour or so.
I'm trying to focus on stock-picking rather than headlines as there has been pretty good action. My stock of the week, Qihoo 360 (QIHU), which I've mentioned a number of times last week, is up strongly on a report from Wedge Partners that it is close to a deal with Google (GOOG) in China. The stock broke out there the $28 level on strong volume.
Alon USA (ALJ) offered a good entry point this morning as it pulled back for several days and then moved out on a buy recommendation by Goldman Sachs. Uni-Pixel (UNXL) was a high-flyer a couple of weeks ago, but it pulled back after news of patent litigation. A ridiculously high price target published today has it moving again.
While I'm trying to knock out some trades, I'm concerned that there is a high probability of a quick reversal if the fiscal-cliff talks fall apart again. I have no confidence in the politicians, and I am afraid the market is so anxious for positive action that it may ignore how hard it will be to get something through the House.
As long as we stay flexible and manage positions closely we should be OK, but don't be overconfident. This market has seen too many negative news surprises lately.