Last week I wrote, "The Labor party is now looking to move away from the surplus promised," this week it happened.
I also wrote, "Then there is the Fiscal Cliff which I doubt will be resolved in the next two weeks."
This week Wayne Swan has all but given up on the surplus and the Republics have held up the changes needed to stay off the Fiscal Cliff, which is now less than 10 days away.
The market had a good week hitting new short-term highs, but when we take a closer look it is not all as it seems.
The small caps are down and the mid caps have dropped at the end of the week.
Over the next week you can expect to see some "window dressing". This is when the major players try to make sure that the market closes on a high for the half year.
In the new year I expect that we will see the pullback we have been waiting for.
I am still holding the quality stocks for the income, trying to trade this sort of market is for the high risk investor.
If you are currently holding cash I would continue to wait to get this invested.
The chart below compares the small caps (red) against the ASX 200 (blue) note that small caps have not hit a new high.