Index ETFs Catch More Whiffs Of Fiscal Cliff

Index ETFs declined further today, with the SPDR S&P 500 ETF (SPY) losing .61%, the SPDR Dow Jones Industrial Average ETF (DIA) shedding off .52%, the PowerShares QQQ Trust Series 1 ETF (QQQ) losing .79%, and the iShares Russell 2000 Index ETF (IWM) losing .64%.

The politicians have still not come to a deal yet, and President Obama and House Speaker Boehner are apparently meeting again this evening to continue hashing out a resolution to the fiscal cliff. Investors and Index ETFs are not buying any of it however, as index ETFs continue to slide on the possibility that the US indeed will fall off of the fiscal cliff and also drag our seasonal Santa Claus rally with it for good measure.

What’s even more troubling is the fact that Dr. Ben’s QE4 plans announced yesterday have failed to make any blip in the markets. QE4 must not be enough to satisfy investors with the fiscal cliff looming ahead. Heck, not even the man himself is satisfied, as Dr. Ben stated yesterday, “We [the Fed] cannot offset the full impact of the fiscal cliff — it’s just too big.” And with the United States possibly heading into recession city behind Europe and Japan, I am wondering if 2013 will be “unlucky 13″ instead of “lucky 13.”

But, today did have some good news, as initial unemployment claims dropped from 372,000 claims down to 243,000 claims for the week of December 8th.

Bottom Line: Index ETFs continue to decline amid stalling fiscal cliff talks. We still believe a deal will be reached, but a Santa Rally might not be realistic, as the clock is still ticking and politicians plan to keep working over the weekend. We are still in defensive mode, waiting for more news to arise.

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