New information changed my mind about a Santa Claus Rally…
The November ISM report came in at 49.5… declaring the manufacturing sector is contracting…New orders fell from 54.2 in October to 50.3.
The market didn’t rally when the White House said there has been progress on the fiscal cliff… naturally the market should have… unless it is starting to realize any agreement will still mean taxes go up and spending goes down.
The only scenario that would have been positive for the market would have been a “kick-the-can-down-the-road” type deal… and this is no longer a possibility in my opinion.
Even the glorious “Grand Bargain” financial media is blaring about will still raise revenue (taxes) and cut spending.
I think there will be another shakeout before a deal is reached… and maybe another shakeout after a deal is reached… as the market realizes the United States is entering into an era of austerity.
The price action today was horrendous from a Bull’s perspective… After making a fresh high on recent rally Mr. Market pulled back below the last three session’s closing prices.
That is why I got net short today.
There is a significant amount of support in SPY from $141.75 through $140 so I will keep a tight leash on this short – starting with a stop slightly above $142.
Below $140 SPY could make a swift move down to the $135’s… so I bought DEC put options with strikes at $140.
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