Fiscal Cliff Optimism Floats Markets Higher

Major U.S. stock indexes and ETFs rise for the fifth day in a row on hope for resolution of the fiscal cliff.

Republicans and Democrats traded proposals and continued their public debate as the clocks ticks towards December 31st amidst reports that progress is being made.  Everyone says they’re “hopeful,” however, few details were available and House Speaker John Boehner won the quote of the day with his “”Let’s be honest, we’re broke” comment.

Senate Democratic Leader Harry Reid said it was going to be tough to get a deal by Christmas and so the days tick on, with now just 20 days remaining to the fiscal cliff.

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For the day, major indexes and ETFs rallied but then stalled and fell back after Senator Reid’s comments and at significant technical resistance levels.

Major Stock and ETF Indexes:

Dow Jones Industrial Average (NYSEARCA:DIA) +0.60%

S&P 500 (NYSEARCA:SPY) +0.65%

Nasdaq 100 (NYSEARCA:QQQ) +1.3%

Russell 2000 (NYSEARCA:IWM) +1.05%

Gold (NYSEARCA:GLD) -0.09%

Oil (NYSEARCA:USO) -0.13%

The Federal Reserve meets today and tomorrow and most economists and analysts expect a new round of quantitative easing to the tune of $45 billion/month to replace the Operation Twist program that expires at the end of the year.  After tomorrow’s announcement we’ll hear from Dr. Bernanke at his press conference.

Apple (NASDAQ:AAPL) bounced 2.2% today but still remains more than 20% below its September high.  Apple stock’s daily chart has also formed a “death cross” in which the 50 day moving average has crossed below the 200 day moving average which is widely seen as a “sell” signal among market technicians.  The “death cross” also has potential ramifications for the broader U.S. stock markets and ETFs.

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Overseas, German economic sentiment took a big jump and triggered a rally in European stocks and European ETFs.

All of this activity takes place against the backdrop of a slowing global economy with Japan and Europe already in confirmed recessions and the United States bouncing along with the slowest of growth.

Tomorrow comes “Fed Day” and, as usual, promises to be exciting.

Bottom line:  Major market participants continue to bet on a resolution to the fiscal cliff and that a slowing global economy will not impact U.S. stocks and ETFs going into 2013. 

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