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Fiscal Cliff Progress Triggers Reversal

John Darsie

Daily Recap video with Rob Smith: http://youtu.be/ClRkNa4RjZU

The recovered from early selling to finished in positive territory Friday, the catalyst being a conciliatory tone from politicians following initial fiscal cliff negotiations. The S&P finished day 0.5% higher after reversing on a dime at around 11:20 ET. After the first fiscal cliff meeting with President Obama, House Majority Leader John Boehner (R) and Senate Majority Leader Harry Reid (D) expressed optimism that the framework of a deal was in place. Perhaps with the contentious election behind us, compromise is possible in Washington.

Despite the market's impressive bounce today, stocks still slumped to weekly gains and we are not yet out of the woods. Although anxiety over the fiscal cliff may be subsiding, it appears the conflict in the Middle East is only set to intensify. Israel moved to draft in tens of thousands of reserve soldiers today as rockets continue to rain down on both sides of its border. The pesky European debt crisis is also certainly not going anywhere. Charts have sustained major technical damage, and the road back from below the 200-day moving average can often be a rocky one.

Apple (AAPL), like the market, was able to bounce impressively when news of constructive fiscal cliff talks hit the wires. AAPL was down over 2% before the bounce, accelerating to as low as $505.75, before bouncing almost 25 points in the subsequent hour. The stock finished the day 0.4% higher, and it will be interesting to see if today's bottom turns out to be the low for the year. Strength from Apple would certainly bode well for the broader market.

Dell (DELL) was not able to participate in the market bounce following a weak earnings report last night. The stock finished the day 7.5% lower, closing at levels not seen since early 2009.

Next week traders will be looking to see if today's reversal leads to a more significant bounce. Progress is apparently being made on the fiscal cliff issue, but the conflict in the Middle East is the big wildcard. Keep in mind that next week is Thanksgiving week, so action could dry up.

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*DISCLOSURES: Rob Smith has no positions