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.