I won’t be one to yell at the tape since we are systematic trend-followers. But markets aren’t doing anything modestly. We get past one cliff only to face another next month—the super cliff (debt ceiling), hereinafter dubbed SC. Bulls are basically saying; “Okay, we have time to prop things before SC”. You might recall the last SC deal was in the summer of 2011 and markets struggled mightily.

Unfortunately for us enough technical damage had been done the past two weeks that trends became uncertain. Now bulls are playing catch-up with large news-driven price ramps. Actually there was a confluence of events as the Fed had (and still is) added plenty of liquidity to markets thru QE which accumulated while the fiscal cliff issue froze investments. Further large dividends from before year-end needed to be reinvested. This stash along with what passed for a cliff fix led to the action seen Wednesday.

Nothing is really fixed of course since a large tax increase is hitting the economy at a poor time. The payroll tax cut will shrink 77% of American’s income which will hit the so-called middle class. I believe this doesn’t include higher taxes for Obamacare now either. We did get the tax issue resolved but spending cuts didn’t take place in any meaningful way. In fact, the CBO scored the cliff tax fix as adding $4 trillion to the deficit over the next 10 years—some fix eh? Plus the president indicated there will be no spending cuts without even more tax increases.

So much for the Clinton era mantra: “The Era of Big Government is Over”.

Economic data released today included: PMI (54 vs 54.2 expected & prior 52.8); ISM Mfg Survey rose (50.7 vs 50.5 expected & prior 49.5); and, Construction Spending fell (-.3% vs .8% expected & prior 1.4%).

Stocks soared with a large opening gap higher with gains across the board. The dollar (UUP) weaker early rallied some intraday; bonds (IEF) fell as stocks rose; commodities (DBC) rose modestly; and, gold (GLD) prices also rose modestly.

Earnings remain in focus soon. It’s interesting that so many estimates have been undone previously and future estimates have yet to be revised lower as per the following chart.

Volume was modest on the sharp rally. Breadth per the WSJ reflected a 90/10 day for most sectors.

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