After Superstorm Sandy closed the New York Stock Exchange for two days -- the longest weather-related closure since 1888 -- the week has been a bit of a snoozer.

That all changed Friday as the selling pressure I've been warning about returned, thanks to a strong breakout by the U.S. dollar, something that hasn't been seen since the May market meltdown.

This is a big deal, since hedge fund types sell the dollar short to leverage their trades in areas like gold, silver, oil, copper and foreign issues. So when the dollar rises, these trades are reversed and selling begets selling.

Why is this happening? And will it continue?

I can see a number of reasons that the dollar was bid Friday, including unresolved political issues like the fiscal cliff of tax hikes and spending cuts worth some 5% of GDP, the real-time unraveling of the social fabric in New Jersey and elsewhere as citizens scramble for fuel and food, and a deterioration of the situation in Europe.

And from a technical perspective, the dollar's push above its upper Bollinger Band has historically been a sign of uptrend initiation. I expect it to continue to rise into 2013.

I recommend my clients and readers continue to maintain a neutral to defensive positioning, raising cash and moving into Treasury bonds while using targeted short positions against weak areas such as energy and foreign stocks.

Internal measures of market strength remain unimpressive, with fewer stocks holding the market at current levels as buyers find fewer and fewer issues compelling at current prices.

Also, the widening divergence between both CEO and investor pessimism and consumer confidence (which by one measure has hit a new post-recession high) has me convinced households haven't prepared for the political turbulence about to hit Washington after the election.

It's like this: Don't expect a fiscal cliff deal unless we get another credit rating downgrade and/or we suffer through significant and painful financial market turbulence that damages the real economy at a time of vulnerability given Europe's unresolved issues and China's attempt to reaccelerate without inflationary monetary policy stimulus. Democrats and Republicans can't strike a deal unless they're looking down the barrel of a loaded gun.

Speaking of Europe, the situation in Greece is deteriorating. Credit Suisse estimates the country needs another €24 billion to fund a two-year bailout extension. This will need to be provided by other Eurozone countries, either through direct aid or write-offs of existing holdings. Another idea, to buy discounted Greek bonds in the open market and retire them, would require recapitalization of Greek banks.

There is no easy answer.

Adding to the pressure is growing German resistance to more aid, Greek resistance to new austerity measures, and a fracturing of the ruling coalition government in Athens.

To summarize, there is simply too much political risk out there -- which is, by nature, unpredictable. CEOs and investors understand this and are doing things like cutting back hiring and spending plans and looking for safety in the dollar. Consumers distracted by Hurricane Sandy, the presidential election, and Halloween celebrations don't yet. They will.

In response, I am adding a new short position against Baidu (BIDU) to my Edge Letter Sample Portfolio. Current holdings include the ProShares UltraShort Oil & Gas (DUG).

Be sure to check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​​om and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.