Market Very Hairy Going Into the Close

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Stocks slowly rising into the close. The Reid-McConnell-Pelosi pressers added nothing to the information flow.

The risk going into the end of the year: Is the risk to the upside or the downside? I wish there were more consensus, but there doesn't seem to be.

Those who argue that the risk is to the upside note the following:

1. A fiscal deal announcement could come over the weekend or soon after
2. Slowly improving economic data
3. Strong gains for year with six days left (most hedge funds have either protected positions or flattened out into year-end; it's unlikely portfolio managers will throw the baby out with the bath water with fewer than six trading days left in the year)

Those who say the risk is to the downside have some very telling points on their side:

1. High bullishness and complacency
2. Hedge funds are long and small investors are bullish
3. Low short positions
4. S&P rallied 5 percent in the last month. Since the bottom on November 15th (nine days after the election), the S&P 500 has gone from 1,353 to 1,427 (a 5.4 percent rally). A good chunk of that has been in anticipation of a deal on the fiscal cliff, but some is also clearly due to seasonal factors.