The debt ceiling issue and media coverage of the same are having a considerable impact on the stock and futures markets. As investors, it’s critical to stay abreast of the situation while avoiding fearmongering.
Though this week has focused on the Economic Modern Family, I want to take a rare U-turn from technical signals and present some options to temporarily resolve the current crisis.
While reviewing the market’s technical macro, it is evident that the S&P 500 failed to clear the 23-month or 2-year business cycle high at 420. Additionally, the small caps or Granddad Russell 2000 have not come close to the 23-month MA and are now threatened by breaking the 6-8 year business cycle lows or the 80-month MA. The same goes for Granny Retail. Despite this, nothing has broken down entirely yet. The market remains fearful and optimistic, maybe resembling stagflation.
Today, I learned that there are several options to temporarily resolve the political quagmire unless the White House agrees to a two-year spending freeze. These options include a short-term extension of the deadline, Senate vote or House discharge petition, taking money from Social Security via the Concord Coalition (nonpartisan), Treasury issuing CONSOL bonds, and minting a $1 trillion dollar coin.
The current market environment has created a consensus of protecting and preserving capital while having some money at risk for when trends emerge. There is always a bull market somewhere, and the economy should not contract much more. However, the economy’s expansion is a whole different story that may take years. To get an idea of where we stand, take a look at the monthly charts of SPY IWM and XRT with their 2-year versus 6-8 year business cycles. We are in between.
ETF Summary
- S&P 500 (SPY) 23-month MA 420 Support 410 held
- Russell 2000 (IWM) 170 support – 180 resistance
- Dow (DIA) Right down to its 200-DMAand a confirmed caution phase
- Nasdaq (QQQ) Worst case-a potential reversal top on weekly chart-best case-gets thru the weekly highs
- Regional banks (KRE) Did the initial damage now sidelining
- Semiconductors (SMH) 23-month MA at 124 with just a few days left-still wonder woman
- Transportation (IYT) Like to see this hold 220 this week
- Biotechnology (IBB) 121-135 range
- Retail (XRT) 56.00 the 80-month MA while momentum is at least flatlining
