Ever since a miracle Fiscal Cliff deal seemed priced-in at S&P 1440 last week, the default script has been "when in doubt, sell."
But as most large portfolio managers are enjoying some holiday time away from the markets, we are not seeing wholesale selling just yet. It's a few cautious players and very active bears who can push stocks down with ease right now.
And the bears can easily be forced to run for cover when there's the slightest whiff of a deal in the air, as the House announcing they would reconvene on Sunday seemed to imply.
So how significant was that 1%+ late day reversal yesterday? It was not as impressive as we like to see to indicate strong hands taking control of stocks again. The close was still lower and still stuck in a resistance zone below S&P 1420.
And more importantly, today would need to see follow-through. Well follow-through will be hard to come by today, with S&P futures down 8 handles at 8:15 am ET this morning.
It seems that waiting all day to hear the results of a special 3 pm meeting at the White House with Boehner, Pelosi, McConnell, and Reid is more than this market can stomach right now. Especially when it seems that going over the Cliff is really in their best plans anyway.
As I suggested elsewhere this morning, many investors just want this political theater to be over so they can get back to the business of investing. Whatever the tax and government spending policies are going to be won't affect their view of a healthy US economy very much.
The key for them is just to get policy out of the way and restore some certainty and credibility to our nation's governance. If that takes another 2 to 3 weeks, the consequences probably won't be pretty.
Speaking of the economy, many eyes will be on this morning's release of the Chicago PMI. This gauge of business activity has been hugging the 50-yard line for months, indicating that corporations have been cautious ahead of the Fiscal Cliff.
The standout component last month was New Orders slipping 5 points to 45.3, a level of contraction not seen since June 2009. Due for release at 9:45 am ET, today's consensus expectation for the headline number is 51.
Also on the schedule is the Pending Home Sales Index at 10 am ET.
For better or worse, most investors will continue to sit on their hands today. Monday is the last trading day of 2012 and it should be a lot more "lively" as it reels from the effects of today's meeting with the President and Sunday evening's special House session.