Aloha

Even El Presidente returning early from his Christmas break did nothing to convince the market a deal can be struck in the final hours before the 'Cliff' comes into effect 31 Dec. We duly took profits as this realisation dawned on the market, comfortably sitting in a 'cash' position as the deadline passes. We will know much better next week, after the month, quarter and year end, how things will shape in the New Year. In our first year we have quadrupled monies that we started with, with all trades being shown in our sister blog Portfolio We shall do a full review and projection on the 'Performance' tab once the year has fully completed. Meanwhile, we would like to wish all our followers healthy, wealthy and intuitive New Year !!   

The Cliff

Despite no agreement on the fiscal cliff talks, the market seems totally unperturbed, apart from a brief wobble in the early hours of Friday morning. With this total lack of progress we fail to see how a 'grand bargain' can be struck, in all likelihood the best outcome will be another fudge and the worst a total collapse. Either way we see profit-taking into the year end and will hold our small short position. We will  short another 2 contracts on a rally above 1450, and set the stop for all 5 contracts at 1463. We will also take profits on any fall below 1410.

Fed Impotence

As we predicted the Fed printed another bucket load of dollars, the market rallied, but ultimately ended down on the week. Cruelly, our stop was breached during this move, crystallising a loss for the portfolio. With the end of the year approaching, there is unlikely to be another opportunity. We will short the market with a small position of 3 contracts on any rally above 1335, with a tight stop at 1351. 

Running on Empty

The market by and large made no progress this last week, together with other western markets. The Nasdaq, due in no small part to Apple,  fared worse registering a fall. This is characteristic of a topping process, where high flyers exhibit weakness first, to then be followed by the broader markets. We have a Fed meeting this upcoming week, where there will no doubt be more money printing, and may give the market another short-term lift. However, this is nothing new that the market has not factored in already. We will continue to hold our short position, and will add a further £1 per point  contract if the market rallies above 1428. Our stop loss this week is adjusted to 1439, and we will take profits at any price below 1390.

Fiscal Cliff

Despite continued wrangles and obvious disagreements over the 'Fiscal Cliff' negotiations, the market rallied for a second week, to finish the month in positive territory once again, making 8 up months this year. We continue to think the market is overly optimistic, but can not rule out an end of year rally to 1460, as market participants seem to be ambivalent to rising debt levels and downgrades of such. Before any rally however, we expect at least one negative week, and with a raft of economic reports disrupted by storm 'Sandy' out this week, we expect weakness.  We are increasing our short position, selling a further 2 contracts at 1417.5 at the market open, and a final one if the market hits 1423. We will revise our stop loss limit to 1434 and set a target of 1383 where we will take profits on 5 contracts, leaving any remainder to run for the week.