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by John Nyaradi

Index ETFs dropped more points Monday after further fiscal cliff negotiations and a weak November PMI report spooked investors. The SPDR S&P 500 ETF (NYSEARCA:SPY) lost .50%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) lost .42%, the PowerShares QQQ Trust Series 1 ETF (NASDAQ:QQQ) lost .20%, and the iShares Russell 2000 Index ETF (NYSEARCA:IWM) lost .11%.

All eyes again are focused on the continued fiscal cliff negotiations, which Monday pivoted around raising income taxes on America's top 2% earners versus closing various corporate loopholes. A deal was still not met by the end of the day, and with 28 days left until America falls off the fiscal cliff, investors are getting all the more antsy for a solution from Capitol Hill, as seen in Monday's market reactions. We still maintain that regardless of the bickering and political infighting right now, Congress and the President will likely "punt" the issue into 2013 if a "grand bargain" is not reached. Still, we can all hope at least that a better deal is made than just a "kick the can down the road" approach, although markets will likely have a field day if the fiscal cliff is averted at all. And if the cliff is not averted, then hopefully you have a place to run and hide come January 1st. With just 7 days left now until Congress adjourns for the holidays, many wonder what the outcome will be.

From a technical perspective, the S&P 500 still is having a hard time breaking through its 50 Day Moving Average and the 1410 zone. As we have said earlier, the bulls will likely not break through those barriers without a big push from the outside, that push likely being a seasonal "Santa Claus" rally or fiscal cliff resolution.

Index ETFs also did not like the disappointing November PMI report released Monday, which indicated that the Purchasing Managers Index dropped below the '50′ level, suggesting a contraction in manufacturing. Monday's Construction Spending Report indicated better numbers however, so Monday's economic reports were a mixed bag. The "Greek Tragedy" also continued Monday, with German Chancellor Merkel indicating that Greek debt write downs could be a "viable option" come 2014. The fun never stops right?

Bottom Line: Investors seem to be looking for two things: a fiscal cliff resolution and a Santa Rally, the second of which will largely depend on Congress getting itself together before Christmas. Investors did not feel any closer to a fiscal cliff resolution or a Santa Rally Monday, and with just 7 days left of the current session of Congress before the Christmas Recess starts on December 17th, the clock is still ticking.

Disclosure: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.

Source: Index ETFs Get Another Whiff Of Cliff