Fiscal Cliff: T-12 And Counting

The clock ticked closer to the fiscal cliff today as the White House and Congress couldn’t reach an agreement and the situation appeared to be deteriorating.

Market participants have been banking on a settlement to the dispute and remain remarkably patient as the days tick down. However, today volatility, as measured by the VIX, (VXX) spiked as major stock indexes and ETFs declined on the gathering gloom.

In the fiscal cliff debate, the two sides descended to name calling and seemed to be hardening their positions in the high stakes standoff.

Major U.S. Indexes and ETFs:

Dow Jones Industrial Average (DIA) -0.74%

S&P 500 (SPY) -0.76%

Nasdaq 100 (QQQ) -0.53%

Russell 2000 (IWM) +0.03%

Gold (GLD) fell 0.25% to $1667.90/oz. while Oil (USO) rose 1.44% to $89.70/bbl.

But the big move for the day was in VIX, the CBOE S&P 500 Volatility Index, also known as the “fear indicator,” spiked 11.50% as investors sought to protect portfolios from gathering risk and make directional bets on the future movement of the stock market and volatility.

VIX ETFs were also very active with iPath S&P 500 VIX Short Term ETF (VXX) jumping 5.8% and VelocityShares Daily 2X VIX Short Term Futures ETF (TVIX) spiking 9.62%.

In technical indicators, the Nasdaq 100 (QQQ) and Nasdaq Composite have both painted “death crosses” wherein the 50-day moving average has crossed below the 200-day moving average. These are widely regarded as “sell” signals and often portend lower prices ahead.

Apple (AAPL), the largest company in the world and favorite of hedge funds, mutual funds and institutional traders, fell 1.42% to $526.31, down 25% from its September highs and is now in solid bear market territory.

FedEx (FDX) reported lower earnings which is potentially bad news for the U.S. and global economy as the company is widely seen as a barometer of economic growth and industrial activity.

In economic reports, November housing starts unexpectedly fell 3% to 861,000, widely missing expectations.

Tomorrow brings a raft of economic news including weekly jobless claims, GDP revision, home sales, leading indicators and Philadelphia Fed reports, but the main event will again be the fiscal cliff.

Tomorrow also brings the controversial vote in the House of Representatives on Speaker Boehner’s “Plan B” designed to raise tax rates on the $1 million and above group and disregard President Obama’s counteroffer of raising taxes for those earning above $400,000.

Bottom line: The clock ticks towards the fiscal cliff and markets will grow more and more impatient as the calendar moves towards December 31st.

Disclaimer: The content included herein is for educational and informational purposes only, and readers agree to Wall Street Sector Selector’s Disclaimer, Terms of Service, and Privacy Policy before accessing or using this or any other publication by Wall Street Sector Selector or Ridgeline Media Group, LLC.