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Weekly Outlook: It will be a quiet week for the market for the holidays with Monday being limited hours and Tuesday closed, but there is a lot to happen between now and Friday. The fiscal cliff is set to take effect in eight days, and the government has made literally zero progress on a deal past some minor agreements. President Obama seems to have potentially given up on a cliff deal and wants to push through some type of stop-gap measure to extend the deadline for a fiscal cliff deal as a last resort.

Any way you look at it, the market will be deeply impacted by what develops this week. The cliff will start next Tuesday, so fear should start to really set in this week if no move towards a deal does occur. At the same time, the market could really start to take off this week if some type of deal is unexpectedly done. Volume will still be light with many traders/firms on vacation, which could make the moves volatile as well.

Besides the fiscal cliff deal, the market will be fairly limited in other breaking news. On the economic data front, we do get some interesting housing reports Wednesday - Friday that should help direct the market slightly. On Wednesday, the market will get the latest Case-Shiller Index followed by New Home Sales on Thursday. Finally, we get Pending Home Sales on Friday. The mix of housing data will definitely make a solid impact on the market but only in relation to the fiscal cliff movement. Additionally, the market gets Jobless Claims and Consumer Confidence on Thursday along with Chicago PMI on Friday.

Europe will be quiet this week as well for the holiday season, and the continent has been out of the news since Greece got its bailout last month. There is no major data on the agenda for Europe, and those markets should follow the American markets nearly wholly.

For earnings, the market has only eight total reports for the entire week. There is no large-cap name to report with the largest name being Cal-Maine Foods (NASDAQ:CALM). Earnings will not have an impact on the market this week. The Federal Reserve has a quiet week as well with only the Richmond Fed Index on Wednesday. Other than that, they will not impact the market as well.

So where are we headed this week?

As we can see there is not a lot on the agenda for the market this week other than the fiscal cliff and some economic data on Wednesday - Friday. The fiscal cliff developments will be at the center of the market, and moving into the week, things are not looking very solid. Speaker of the House John Boehner said that he was still optimistic for a deal to get done by the deadline. President Obama is not as positive. Obama is hopeful for a stopgap measure to now be passed, which would help the market get its footing back. A movement towards a deal as well this week could even help the market rally. Lack of progress in either, however, should mean the market sees a healthy amount of selling this week. Enjoy the holidays but be wary of the market on Wednesday through Friday.

Stocks To Trade:

The four stocks we are looking at this week are Microsoft (NASDAQ:MSFT) and US Bancorp (NYSE:USB) for longs. We are watching Ingersoll Rand (NYSE:IR) and Target (NYSE:TGT) for shorts.

We are liking the looks of MSFT and AMD this week as both look like they could set up to break out. MSFT has resistance at its gap down level of $28 after the release of Windows 8 as well as it 50-day MA at $27.75. We believe MSFT could be setting up well to make a nice move higher. The catalyst for the company is multi-pronged. First off, the Windows Phone is starting to make some strong strides into the mix with Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL). While definitely lagging both companies, MSFT is now holding 3% of market share in the phone industry, moving into third place in front of Research in Motion (RIMM). The company continues to make positive movement into the industry, and we believe this will continue to grow in 2013.

Additionally, we believe the slow results in Windows 8 are now priced into the stock. The company's future P/E is now sitting at 8.5, which is very cheap for the shares. While the start of Windows 8 was weaker, the company believes the move towards the tablet-style system will be positive for the future of the PC market as it moves into tablets. $28 has been strong resistance since Windows 8 comes out, and we believe the stock could make a big move if it breaks above that level. Additionally, USB is starting to look quite solid right now. Financials were making a move over the past couple weeks, but USB lagged its peers. The company broke down after its last round of earnings and has been weak since, but the stock is starting to show signs of a bottom. The company has shown very good support at $31 and looks like it could get back over its 50-day MA, which we believe is a signal of strength.

The problem for USB was that the company's latest earnings did not break analyst estimates at 0.74. The company was recently downgraded to Equal Weight by Morgan Stanley as well due to valuation, but we believe that the stock needs to play catch-up. USB is one of the healthiest and strongest companies in regional banks, but they have been lagging competition with only 1.1% growth expected in revenue in the coming quarter. At the same time, the stock dropped 10% since its earnings report. Its future P/E is now down to 10.5, and we believe showing great value. Right now, we can make 12% on the 31/29 bull put spread for January expiration. With the stock looking ready to break out and strong support at 31, we like USB. Wait for the break of the 50-day MA before making the move.

Trade #1: Long, MSFT

Breakout: Break of $28

Trade #2: USB, Jan19, 31/29 Bull Put Spread

Max Gain: 12%

For bearish trades, we like the looks of Ingersoll Rand and Target. Both stocks are looking weak with IR looking like it could break out, and TGT looking solid for a bear call spread. The key level to watch with IR is 46.50 where the 50-day MA is sitting. The company started to show a lot of weakness on Friday, dropping nearly 4%. One of the issues for IR may be that the company is set to contract earnings and revenue in Q4. The company is expected to see a nearly 2% decline in revenue and 10% decline in earnings. The company is being hit by choppy demand in their major markets, and after a solid Q3, the company is expecting to see a flat Q4. They guided well-below estimates at 0.64 - 0.70 EPS vs. 0.79 expected.

Moving into earnings and after a 10% increase post-earnings, profit taking appears to be occurring. We are watching that 50-day MA for a breakdown right now. Another weak stock right now is TGT. Last week, TGT lost its 200-day MA and a key $60 support line that had held since late July. The problem for TGT is that December sales have said to have been weak from Cleveland Research. The company is not optimistic about 2013 now. With a large amount of expectations expected for the holiday season, weakness here would be a rough way to start off the year. Cleveland Research does channel checks and compares them to statistics from previous periods, and they are seeing weakness for TGT.

The company has also lost technical support, and we are liking them for a bear call spread. Earnings will not be out until after January options expire, and right now, the market does not seem to be excited about TGT's prospects. We like a safe 62.50/65 bear call spread for a 10% max gain. TGT has not been at 62.50 since failing its 50-day MA, and the MA is now at 62, creating a lot of resistance.

Trade #3: Short, IR

Breakout: Failure of 50-Day MA

Trade #4: TGT, Jan19, 62.50/65 Bear Call Spread

Max Gain: 10%

Chart courtesy of finviz.com.

Source: 2 Stocks To Buy, 2 Stocks To Sell, What's Next For The Market