Too Much Action Causing too Little Reaction

When I go through the news headlines, I can’t help but notice the number of “major” stories that are out there right now that could move the market rather dramatically in one direction or another. We have the troubled US economy, the stalled Chinese economy, the European Debt Crisis, civil unrest in the Middle East, the US Fiscal Cliff, the Santa Clause Rally, Year End Window Dressing, and the list probably goes on.  Am I missing anything?

Among these stories are both bullish and bearish connotations…….sometimes in the same story. With so much unsettled in these stories, so much uncertainty in both directions, is it possible that this potential market moving news tug of war will create a standoff……..a draw? Will the pull of both sides cancel out any advantage of either direction?

It could happen! As I see it, it is possible that the market finishes this month….and thus the year… off where it is now. As long as we have no deal in the Fiscal Cliff, no definite direction in the US Economy, no answer to the European Debt Crisis, no heating up of the Chinese Economy, and no truce or war in the Middle East, we will probably finish the year very close to where we are now. Between the bullishness of the Santa Clause Rally and Year End window dressing, and the bearishness of the idea of capital gains and dividends being taxed as ordinary income, we could see a relatively stagnant close to 2012.

With more and more external factors influencing the US markets to a greater and greater extent due to Economic Globalization, there will be more and more occurrences where several stories on both sides of the market will come together and offset each other for periods of time. The key to these market events will be uncertainty. Certainty will bring direction to the markets by allowing the stronger stories to dictate direction and break the standoff. But, with multiple stories in the headlines reeking with uncertainty, these market standoffs will become the likely scenario.