A couple of weeks ago, I compared this fiscal cliff drama to one of the classic Greek tragedies where all the main characters die in one way or another and the play ends with everyone left standing mourning their losses, cursing the gods and so on. I was joking, but now I'm not so sure. Today, it finally became apparent that the president really has no intentions of averting the fiscal cliff; he has calculated that the ensuing mess will be blamed on the Republicans, so how could a politician pass up that opportunity? You think I'm wrong? How else can we explain that only today did the president finally call together in a single meeting the majority and minority leaders of both houses in the White House. This is the first time since the election that this group has met. I don't call that leadership.

But the reality is starting to dawn on the markets and they are trading downward. SPX closed at $1402, down $16 and RUT closed at $832, down $5. The only good news is that trading volume remains low; only 1.7 billion shares of the S&P 500 stocks traded today. Trading volume was down 8% on the NYSE and was down 15% on NASDAQ. So panic has not yet set in; the large institutional traders haven't started running for the doors. But they are hedging their portfolios. VIX jumped up to 22.7% today.

Economic data of late hasn't been terrible, but I think it has been largely ignored; all eyes are on Washington. New unemployment claims are stubbornly running around 350k month after month. The new home sales reports yesterday were upbeat; the pending home sales today were a little disappointing with an increase of 1.7% for Nov (October's increase was 5%). The Case Schiller Index reported a nice 4.3% rise in housing prices earlier this week. So the economy continues to muddle along and slowly recover. But next week??

My January iron condor on RUT at 700/710 and 870/880 stands at a P/L of -18% with delta = -$104 and theta = +$154.

Enjoy your holiday weekend and don't let these political and economic problems worry you too much. Focus on what's important. Best wishes for a happy and prosperous new year.