Perhaps Tuesday was the real deal as bulls thumbed their noses at the government shutdown. What should pass for logic is market’s decline given the DC dysfunction. But investing is frequently illogical and that’s why others are more successful just watching prices and following their systems. Doing so is frequently a tough act since emotions and common sense steer you in the wrong direction. For most, Tuesday was a head scratcher as markets rallied in the face of DC transparent brinkmanship.
The ADP Employment Index is starting to lose credibility. The report Wednesday showed employment at 166K vs 180K expected but prior revised from 176K to only 159K. On the one hand headline writers could blush and spin the results as “a beat” while others would laugh it off. On a bullish note, the Fed tossed-in another $3.697 billion in POMO Wednesday. The simultaneous settlement at 11 AM and the close of Europe trading allowed for the 11 AM ramp in stock prices. You don’t need a Clouseau to connect the dots.
Meanwhile, Da Boyz, dba Primary Dealers of mega-banks went to Washington to warn Obama and the world that another debt ceiling breach along with the government shutdown would be a disaster as noted by ZeroHedge and Yahoo!Finance:
"...Blankfein: 'There’s precedent for a government shutdown; there’s no precedent for default. We’re the most important economy in the world, we’re the reserve currency in the world, and payments have to go out to people. If money doesn’t flow in, then money doesn’t flow out, so we really haven’t seen this before and I’m not anxious to be part of the process to witness this.' Of course this from the leader of Goldman Sachs which the government is trying to fine $20 billion for selling fraudulent debt and giving bad advice is now providing the same government with advice on its own bad debt, is not lost on us.” (ZeroHedge)
"...Add to this Bank of America under investigation for mortgage loans, JP Morgan trying to settle an $11 billion law suit with the government and the State of NY trying to take Wells Fargo back to court for flouting rules of the previous fraud settlement." (Yahoo!Finance)
So yeah, as Yahoo!Finance correctly noted: "…whether or not guys writing 10-figure checks to settle criminal accusations should be allowed to roam freely in the Oval Office will just have to wait for another day.”
Bernanke’s 3 PM speech in St. Louis was a non-event as to current or future monetary policy. Meanwhile Fed Governor Rosengren made the spectacular statement: “Reality doesn’t always live up to our forecasts." Amen brother!
Once again we’ve seen stocks fall most of the trading day only to see a powerful spike into the close. Why? Because Obama said he was willing to negotiate but only after the government reopens, meaning he gets his way. Laughable.
Volume was light overall and breadth per the WSJ was negative.
Bernanke said little Wednesday to offer clarity on the monetary situation. Obama suggested he’s willing to compromise once he gets what he wants. There’s no other way to spin that.
Most economic data coming forth Thursday and possibly Friday will be delayed with the shutdown. As the shutdown continues the nerves to settle with rise.
Let’s see what happens.
Disclaimer: The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com.
Disclaimer: The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell only any security. Market sectors and related ETF's are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotation's aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com