Part of our job in uncovering winning long-term investments and short-term trades is to determine the market’s near- and intermediate-term direction. But sometimes that secondary mission is far from clear-cut and we hesitate to make predictions. Unfortunately, this is one of those times.
The major stock averages are in the middle of the trade ranges that have prevailed for the last six months or so. They are neither overbought nor oversold. On the plus side, our models right now are very mildly bullish, suggesting share prices should have a slight upward bias in the next few weeks. The economy is slowly headed in the right direction and we’re entering a seasonably favorable period stocks. Yet so much hinges on the fiscal cliff discussions (which don’t appear to be making any real headway so far), that it overshadows readings from our forecasting models.
The politicians in Washington know full well the implications to the economy of not reaching a compromise on the budget impasse. Sadly, both sides appear intractable in their respective positions toward tax hikes and spending cuts.