Debt resolution already priced?

I think the debt resolution has nearly already been price by the market. I think the market is setup to sink until congress can work this out. Yea, we may get a pop but it won't last in my opinion. The risks are only going up. Just today the republicans and democrats are BOTH coming up with new bills. They couldn't agree in the beginning when sitting down at a table, why would new bills written by each party be any different? They have less than a week.

Today's rally in equities was pretty pitiful in my opinion. I honestly think the market is being held up by the expected debt resolution. When the market realizes it is not coming in time, there will be a panic. If the SPX cannot consolidate above 1330SPX (an important number for me), its back down to 1300SPX and possibly the lows, again...

Of course, I could be wrong.

" I honestly think the market is being held up by the expected debt resolution." Agreed. I read the headline on CNN this morning that investors "shrugged off" the problems in Washington, and bought the market anyway "calling Washingtons bluff". OH MY! This is not about the debt ceiling, anyway-it's truly about getting our debt downgraded. Should that happen, investors won't be able to shrug off crap, period. But then, this isn't really about "investors" anyway-unless mom and dads new plan countrywide is to ONLY own the highest weighted stocks in the indexes. Because even as the market made a strong comeback off the bottom today-2 out of 3 stocks were DOWN. An, of course, we ended on the NYSE with 4 stocks down for every 1 up. Is someone making money? YOU BET! Is it mom and dad and their IRA-hardly. Mom and dad are about as adroit spotting the shell game being played on them in the market-as they are in knowing what the rating agencys, and our debtors want to see going forward-which is Not a simple debt ceiling increase. The speaker of the house tonight, while avoiding any conversation about revenue-and why it should be the golden calf at most Americans expense-calmly said that he knew that the plan put forward by the senate would be passed by congress, and that the "crisis Obama created would be put to rest". I DOUBT he can guarentee that, as it is only very slightly less than proven fact he has no controll over his own caucus. If they don't, all hell breaks loose-it's pretty simple. Its Monday night........... tic toc

I agree Orange. "Be careful what you wish for." It's the ultimate cruel irony. The one thing investors fear the most is default. And we very likely won't have one. But the one thing that investors fear the least, a sharp market sell-off after a deal is struck, is what will follow instead. I strongly suspect expect a Sell Signal right around the time the agreement is signed in, based on the steady erosion in market internals underway.





http://stockcharts.com/c-sc/sc?s=$BPCOMPQ&p=D&yr=0&mn=4&dy=0&i=p22976705228&a=225433286&r=948.png

http://stockcharts.com/c-sc/sc?s=$SPX&p=W&yr=3&mn=0&dy=0&i=p86245322513&a=228018391&r=3518.png

I think the market is up because we are about to end the month and the indices can still close the month up. We will probably get a sell off as soon as we enter August... Just guessing...

Nice charts D, thanks. Your post of the NAZ really hits home with me. I sat looking at the internals right after I posted here-and the NAZ had me riveted. Summation rolling back over under zero, 5 and 10% indexes both under zero-with a negative cross to boot-ouch. NYSE rolling back over short of 250-with a negative cross on the 5 and 10's as well. Plenty more, as you know. Hate to front run this, but it seems we have a good possibility of a rally failure coming. Due to the path and levels the internals are doing this at-it could be quite serious, imho. twt.

I think the debt resolution has nearly already been price by the market. I think the market is setup to sink until congress can work this out. Yea, we may get a pop but it won't last in my opinion. The risks are only going up. Just today the republicans and democrats are BOTH coming up with new bills. They couldn't agree in the beginning when sitting down at a table, why would new bills written by each party be any different? They have less than a week.

Today's rally in equities was pretty pitiful in my opinion. I honestly think the market is being held up by the expected debt resolution. When the market realizes it is not coming in time, there will be a panic. If the SPX cannot consolidate above 1330SPX (an important number for me), its back down to 1300SPX and possibly the lows, again...

Of course, I could be wrong.

I think you are completely right and as I wrote yesterday this is to me a ''sell the new'' type of event as every retailer will run to buy stocks as soon as the announcement of an agreement is published. It's the contrarian point of view that works most of times and this time too, imo.

Edited by andr99, 26 July 2011 - 01:37 AM.