Thanks to our politicos hanging over the cliff by one trading day, the 2013 stock market started out like the Oregon Ducks in the Fiesta Bowl ( a touchdown kickoff runback in 28 seconds) Go Ducks !! The Advance/Declines on the NYSE were not only a reversal from the negative week before, but a huge 3011 to 188 landslide. In the days before the HFTs ruined the correlation independence with basket trading, this would indicate a Bullish mandate ( correlations have come down recently, however). Also more than 10:1 was the NYSE new highs over lows. More data, including multi-year highs and lows, can be seen at my blog: www.mktsentiment.blogspot.com
Despite a second shortened week (due to holidays) Volume was quite brisk, with a tendency towards speculative (Nasdaq). Not surprisingly, both the VIX and the CBOE put/call ratios dropped a major 10 points in their complacency. Even with the new year and the temporary fix, Insider sellers keep climbing - now up to 59 to 1. Financials remained the leader, but not the huge margin of the prior week (1/3 of all 10 sectors).
On a Bearish note, both the McClellan Oscillator ( over +50) and the Bullish % ( % of stocks on a Buy signal) are overbought short term - both of these Indicators are usually quite reliable - unless a huge rally is projected behind the cliff settlement. Money flows are not encouraging as well, with $$ flowing out of domestic equity funds and into MMFs bigtime!
As we await the next "deadline" - that movable date that resemble the snooze button on the alarm clock - it would be naive to assume the New Congress would act any better than the lame ducks. In a December WSJ piece, Princeton law prof. - Jonathan Macey - rips our electees, not only for serving the lobbyists and campaign donors rather than the voters, but the perquisites they have voted themselves. With their own retirement benefits, health insurance, insider trading is getting looser. Already they have consistently outperformed the S&P Index - Democrats by 9% (Senators trade more, ergo outperform by 12%). 1/3 are millionaires ( Darrell Issa at $1/B, and ex-politician Al Gore now entering the 1% by earning $100M selling his TV network to Al Jazeera). Poor hedge fund managers only returned 1% last year - 3.4% over the past 3 years. Yet hedge funds assets grew last year to $1.8T! And Congress keeps up their divine duty - "I'm from the government and I'm here to help". We in California are going to get 900 new laws this year. Nationally, our tax dollars go to enforcing such important laws like - only four cats to a household; doing wheelies (a la Evel Knievel) now illegal.