Join        Login             Stock Quote

How Markets Might Get Over The Fiscal Cliff

 November 14, 2012 08:07 PM

The fiscal cliff is still looming, although there is reason to think that both President Obama and House Republicans may soon find common ground on tax issues, says Jeffrey Saut, market strategist at Raymond James.

Compromise with Republicans may be the only way for President Obama to avoid the "lame duck" label in his second term. That may include some series concessions as it relates to the fiscal cliff -- the set of automatic tax increases and spending reductions set to be implemented by year's end unless Congress takes action.

Conversely, Republican congressional leaders also realize that they may see no political benefit from any potential economic recovery unless they also cede some ground as it relates to the cliff.

[Related -Bogle Says Indexing Destined To Win The Battle Of The Quants]

As Saut said in his weekly missive:

… Talking to my contacts inside the D.C. Beltway suggests that better cooperation may be just around the corner. Indeed, the President got beat-up pretty well on the Libya scandal, Obamacare, no budget, etc., potentially making him more malleable. Additionally, I am told he wants to secure his place in history and does not want to spin the economy back into a recession.

Speaking to the Republicans, they got absolutely crushed in the Electoral College vote, potentially making them more pliable as well. In fact, John Boehner's speech was the most conciliatory address I have ever heard him give.

Of so, what you could see is an extension of the Bush tax cuts because they foot to ~$265 billion per year with $55 billion for the wealthy, but a large $210 billion for the middle class. Somehow, I don't think the President wants to take those tax breaks away from the middle class.

[Related -VMAX and VMIN Poised to Be Most Important VIX ETP Launch in Years]

I also think the President will raise his $250,000 threshold on the definition of "rich." The payroll tax cut will likely expire because nobody really knows what it is anyway; and, I think the mandated spending cuts will be postponed since everybody I talk to, both on the left and right, does not want to run the risk of another recession.

Saut notes that the U.S. markets continue to face other challenges, including a breakdown from the typical path the S&P 500 takes during Presidential election cycles. Also, he noted that forward earnings guidance that continues to slide.

One price area to continue watching is volume-at price-support for the S&P 500 in the 1320 to 1350 range.

Source: Stockcharts.com

As seen above, the long bar coming from the left of the chart represents a price area where stocks have traded the most over the past three years. That price area may act as a magnet to drag prices slightly lower from here. However, technical analysts also believe that the price area may act as a support that could help stave off a further slide.

The post How markets might get over the fiscal cliff appeared first on Smarter Investing.



Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageBogle Says Indexing Destined To Win The Battle Of The Quants

Vanguard founder John Bogle gave a powerful speech last month at the Q Group’s Spring Seminar that lays out read on...

article imageVMAX and VMIN Poised to Be Most Important VIX ETP Launch in Years

REX Shares is launching two new VIX exchange-traded products on Tuesday in what is likely to be the most read on...

article imageThe April 29 Gold Triangle Breakout Update

If you’re just watching stocks, you may be missing this powerful Triangle Breakout surge in read on...

article imageSell In May, But It Is A Presidential Election Year

With May just around the corner, articles covering the "Sell in May' phenomenon are not in short supply and read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.