Fiscal Cliff Drama Unfolds as Apple Aims Higher

Index ETFs rose Wednesday after President Obama and Speaker Boehner eased fiscal cliff fears.

Index ETFs rose Wednesday after hopes of a possible fiscal cliff resolution re-surfaced. The SPDR S&P 500 Index ETF (NYSEARCA:SPY) rose .81% and the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) rose .75%, while the PowerShares QQQ Trust Series 1 ETF (NASDAQ:QQQ) ETF rose .86% and the iShares Russell 2000 Index ETF (NYSEARCA:IWM) rose .84%.

Index ETFs appear to rise with any whiff of good news regarding the fiscal cliff, as remarks by President Obama and Speaker Boehner seemed to indicate that Capitol Hill would have an agreement by this Christmas. Furthermore, several key Republican House members have indicated that Obama’s current fiscal cliff bill, which has already passed the Senate, could pass the Republican House soon, further indicating to investors that a deal might be in sight.

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From a technical level, the S&P 500 finished today at the 1410 level, and appears to be stuck there, just a few points below its 50 Day Moving Average. Despite gains today, the S&P 500 bulls will have to push hard against current 1410 levels and 50 Day Moving Average to break through into a new bull market. This is certainly possible and of course very likely if Congress does reach a deal with the President regarding the fiscal cliff. With a positive MACD and a rising RSI, the S&P 500 could very well be moving into bullish territory, if and only if it can break current resistance levels. With 33 days left until the fiscal cliff ‘cliffs’ the United States, only time will tell if markets will finish the year in the green or red.

In other mixed news today, Spain received 37 billion Euros to restructure their banks, while new home sales declined for the month of October.

We continue to carefully monitor Apple Computer (NASDAQ:AAPL) as it struggles to reclaim its 200 day moving average and remains approximately 17% below its September high.  The last time Apple (NASDAQ:AAPL) had a sustained break below its 200 day moving average was in the depths of the financial crisis and was followed by a 50% decline in the stock (NYSEARCA:AAPL) and in the S&P 500 (NYSEARCA:SPY) over the next few months. 

Bottom Line: Fiscal cliff fears were eased Wednesday after investors saw “light” at the end of the tunnel of negotiations. Whether the bulls can mount an offensive to break through current resistance levels is unknown, but a fiscal cliff resolution would surely help. Likewise, if Congress fails to get a deal in place, the S&P 500 would most likely finish the year in red and begin to brace for the “Great Recession 2013.”

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John Nyaradi is the author of The ETF Investing Premium Newsletter.