What a week.  The markets (and much of the world) hung on the words of Obama, Boehner, Reid and others as they waxed poetic about the impending cliff...and with just minutes to go before the close, extreme volume rushed in to the SPX based instruments.

The markets overall had a 'good' week and thus there is cause for celebration by the perma-bulls as they are roaring for a steady strong ramp into the close of 2012.

We are 40% in the market (net short) and the rest in cash as we await the next move up or down.  The primary gauge used here is the $SPX.  The 50 DMA for the S&P 500 is 1421 and this week the index topped out at 1420.  Our short position will be confirmed by the index pulling back next week. Best case in a market recently characterized by making lower highs and lower lows, this market declines over the coming weeks and makes a lower low from the mark of 1343 hit in mid-November.  Support will likely be found around the 200 DMA at 1384 and that level will be watched closely for a bounce.

Given next week will likely bring more of the same (knee-jerk reactions to politician news conferences), we will keep stops very tight and will look to cover our short positions if the S&P moves much north of 1422 next week.

The VIX did briefly hit a 14 handle this morning, bottoming out at 14.89.  Ultimately a lower VIX print would have been better received but anything initiated to the short side when the VIX is in the 14s has historically done fairly well. 

Here are your closing numbers:

DJIA    13,025
S&P       1,416
Nasdaq  3,010