Looking at the barrel of a loaded gun is usually incentive enough for anyone to strike a deal. The political powers that be that are working on the Fiscal Cliff resolution have yet to see that “loaded gun”. The negotiations started after the elections were over and the chance of losing one’s position in Congress is now out of the question.

So, the incentive to strike a workable deal isn’t there. And yet, we still have hope.

The markets will now also be dealing with the possibility of tax selling along with investor’s fears about the ramifications of any deal going forward. What is usually a very strong month for the market could turn out to be just the opposite: an opportunity to sell.

Herein lies the real opportunity for investors should this double whammy of tax selling and investor unease actually occur. The selling during periods like that usually begins orderly and with reason. The explanations for a softer market early on are simple and logical. However, as the market continues its bearish trend the selling becomes more frantic and without rhyme or reason. When that happens, it is a perfect buying opportunity. We do see the possibility of that happening at about 66%. The only other scenario is that we stay in this very narrow trading range regardless of a resolution or not.

The Federal Reserve meets on Tuesday and it is expected that they will become more aggressive in trying to shore up the economy. We will find out Wednesday afternoon what that will actually mean. Lot of economists see this as a busy week, however, we don’t think there are any major market moving events other than the Fed meeting.

Producer price index will be benign, Jobless claims will continue to shrink slowly, and retail sales will show that same store sales are flat and online sales are up.

We think Santa can still do it with eight reindeer.