The 8pm deadline for last night, set by Senate Majority Leader Harry Reid, passed without any agreement on the Fiscal Cliff. Conflicting reports continued to circulate over the weekend about the state of the talks but the FT reports that Democrats reportedly said that talks had stalled over a Republican demand that any new deal should include a new way of calculating pensions which they feared would mean a cut in benefits. Indeed Senator Reid is being quoted as saying that he will not agree to cut Social Security Benefits. In an interview broadcast on Sunday, President Obama expressed continued optimism that a deal to advert automatic tax increases and spending cuts could be agreed by Congress. On Friday, Obama said that if the Senate Leaders fail to craft a deal they could approve and move to the House, he would instruct Senate Leader Reid to construct a Bill to prevent tax rises to all but the wealthiest Americans. If then passed in the Senate it would put the House in a position of potentially rejecting the Bill and meaning that taxes would rise for all Americans on Jan 1st. In that case Obama indicated on Sunday that he would then look to have a new Bill introduced to Congress later this week that would cut taxes on all but the wealthiest. On Friday the S&P lost 1.1% as there was no indication of a deal coming together. Fiscal Cliff news will dominate today’s session. In Europe, the Dax is closed for the day will reopen on Wednesday and the FTSE closes at 12.30 pm.
The only data of note in the US is the Dallas Fed Manufacturing Index and the US Indices have normal trading hours today.
March S&P 500
The Fiscal Cliff continues to play havoc with the market and with no sign of any deal the market got slammed into the close. As indicated on Friday the market dropped to my buy zone and I went long at 1408 only to be stopped out at 1402 before my 5 handle rule came into play having made a new low at 1399 I went long at 1404 and I covered this position at 1410 and I ended the day flat. Today I have no great appetite to trade given the volatility with the Fiscal Cliff situation and the fact that it is New Years Eve and Europe is mainly closed. If the market continues to sell off I will an aggressive buyer from 1355/1360 with a 1348 stop. Otherwise I am going to just observe as I still believe they will come up with some solution because the ramifications of a no deal are huge. I do not want to be short at this time unless we close the upper Gap at 1435/1440.
Silver Rolling Contract
No change I am still a buyer on any dip to 29.40/29.70 with a 29.30 stop which is just below the low made before Christmas.
Euro/USD
The Euro worked really well on Friday as after I posted we had a nasty sell off to a low of 1.3166. I went long at 1.3180 and I took a nice gain at 1.3225 and I am now flat. Today I am still a buyer on any dip to 1.3160/1.3180 with a 1.3140 stop and I will also be a seller on any rally to 1.3280/1.3310 with a 1.3325 stop.
USD/JPY
The USD/JPY just missed my 86.50 sell zone before falling 80 points. Today I will leave my sell zone the same at 86.50/86.80 in small size with a 87.10 stop.
Gold Rolling Contract
Gold continues to trade heavy and today I am only interested in going long if we dip to 1635/1642 with a 1628 stop.
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