If left to its own devices, the week ahead would be almost a complete non-issue, with little volume and inconsequential volatility due to 2-day Christmas holiday (technically, Monday is a half-day, but with no equities markets, no data, and no Congress, we're not sure what the point of the half-day really is).  The only thing that could cause it to veer off that uninspiring course would be some actual progress on the Fiscal Cliff.  To that end, Congress is out until the 27th at best, so Wednesday will essentially mark the week's inception.

The scant data offerings between then and Friday are no cause for concern or for major market movements.  Even on a normal week, the line up of data and events would be excruciatingly light.  The only hope for something interesting to happen rests with politicians and whatever measure of progress (or even actionable political developments) can be mustered concerning the Fiscal Cliff.

Last week, both side of the aisle folded their arms and said "Hmmmph!" again, helping bond markets dig their heels in before breaking through the weakest levels since late October.  The technical suggestion is that any sort of success with the Fiscal Cliff would have led to a breakout test.  This would have looked like a run toward or through 1.90 in 10yr yields and under 104-00 in Fannie 3.0 MBS.

On a final note, keep in mind that the holiday will have a material impact on the level of participation regardless of Fiscal Cliff developments.  In the same sort of way that you make various arrangements before going out of town for a few days (doors locked, lights off, double check those windows, heat turned down, neighbor has your cell, etc...), analogous arrangements are made in markets.  This means that even the most sensational Cliff headlines won't bring all the regular volume back into the picture, and low volume greases the skids for volatility.  Bottom line: sensational Cliff headline has extra power to stir things up, should we get one this week.