Sunday, December 23, 2012

An Agreement On "Fiscal Cliff" In 2012 Is Not Likely

Long Term Current and Past Portfolios

New Long Term Dividend Portfolios

After rallying on Monday and Tuesday, SPX sold off and formed a new down trending price channel (orange).  SPX very likely would continue trading in that channel so long as there is no resolution to the budget negotiation in DC.  Chances of Reps and Dems reaching an agreement before Dec 31 deadline is not good imo.  

Possible outcomes are:
  • (A) An agreement reached and "FC" avoided (30%): Short term (hours to days), indices would rally initially on the back of short covering.  I have no idea what happens in the medium term (days to weeks), but long term (weeks to months) I believe indices would rally and put in all time highs.

  • (B) No agreement by EOY (70%):  Short term selling would accelerate significantly (5% to 7%) due to "tax selling" and general uncertainty.  Out look for the medium term would also be very bleak because once the Dec 31 deadline passes, the negotiation over cuts in spending and taxes would be dragged on for weeks if not months.  Long term, however, I believe indices would eventually rally and put in all time highs once an agreement is reached.
Last week, per my plan I did my first of four in both RTS and RTS-Div Portfolios.  My plan is to see if an agreement is reached next week and at that point do another buy.  Otherwise, I am going to wait to do more buys in early 2013.

Face Book

Disclaimer: The views expressed are provided for information purposes only and should not be construed in any way as investment advice or recommendation.  Furthermore, the opinions expressed may change without notice.