Well all the stock market has been about the past month is the fiscal cliff. Uncertainty causes volatility and confusion as the market tries to price in the future. I believe the market has a deal currently priced in.
How?
The people that believe there will be a deal are already in. The people that believe there will be no deal are already out. The next question is whether the people in want out or the people that are out want back in.
The DJIA futures exploded up 250 points in the post market on Monday with a White House/Senate deal seeming to be in place, unfortunately index futures are not trading tonight so we will have to get clues to the stock market reactions to the House of Representatives balking at the deal in its current form.
The probabilities are hugely in favor of a deal being made in time due to political pressure on both sides. However a few times politicians have done the unthinkable.
By tomorrow morning there will be no tomorrow for the fiscal cliff and we will have answers either way. With uncertainty out of the way tomorrow morning we should see a trend emerge from here. Professional money managers will have to get back to work after the holiday season pursuing alpha. This pursuit should create trends as they search for the best trading vehicles for returns.
I am leveraged long going into tomorrow morning with Apple in the money call options and FAS at the money call options. The chart was screaming reversal Monday, so I responded. After a month of trading option strangles I am ready to become a trend trader again with this fiscal cliff behind us. The charts say up for now but the politicians will have the final say of which way we go.