Stock Market - There Goes That Hope Thing Again........

By: Jack_Steiman

The last two trading days, last Thursday and Friday, saw not only hope in Washington but many thought a resolution was going to be at hand by today. Both sides were getting together and talking nicely with each other. A nice change of pace and the very fact of them playing nice played over in to the emotions of the stock market. Folks were feeling good about things and up went the market. Two strong days. Over the weekend, however, bad timings came in once again. Both sides now saying things aren't going along swimmingly any more. As a result, we saw our futures nose diving last night with the Dow down almost 140 points at its lows. Any and all news from Washington was literally running the market up and down, making things very difficult for market players. Price was moving with every word. Tough way to try and play this very difficult game.

Futures did recover some pre-market, but the Dow futures were still down approximately one hundred points. The low, however, was reached pretty much at the open. Pre-market I spoke about how this was likely since too much is at stake for our entire economy. Washington would finally get a deal done was more likely than not before the 17th comes and goes. The ramifications of not doing so are simply too deep and intense for our country. Based on that thinking, I went long the SPY and this paid off as the market erased all the losses once we heard midday that the two sides would be coming together this afternoon an hour before the market closed. To sum it up, were trading on news. This is a terrible way to play but, based on consequences, I think staying more on the long side of things makes the most sense. But then again, I am trusting that something positive will get done. Who knows if that thinking is very wise. While it should be a slam dunk, let's remember who we're trusting. Makes one ill thinking about it.

If we break this down we can reasonably all agree that the consequences of not getting a deal done would be devastating. Devastating not only to the people of this country who would suffer terribly, and that's what matters most, but also to these ego driven politicians. It would be death to their careers. Their satisfaction ratings are down to 11%. Can you possibly imagine that the people of this country would have so little faith and trust in their leaders? It's so hard for me to come to terms with that. 11%!!! More than anything else they want their ego driven careers to push on. It would be their worst nightmares to watch people vote them out.

I mean, really, what would these poor, helpless folks do if they lost their perfect little day jobs in Washington! They don't care about the people they represent, but they'll do almost anything to keep their positions of power. They'll want to be perceived as workers for the people, and now that the debt ceiling is coming down to the wire, you get the feeling that the two parties will somehow find a way to get it together. Wait, I have to wipe away some tears. That's better. Anyway, for all the wrong reasons I believe things will get worked out, even if it's done at the last minute.

1687 down to 1683 is strong support for the S&P 500. Lots of moving averages from the sixty-minute chart to the daily chart. Below that, and just below at that, is more support at 1677. While we tried to test down today we held above these levels with relative ease and then blasted up. When the news was good out of Washington the market blasted higher. When there was bad news the market fell some, but nowhere nearly as hard down as the moves to the up side.

That's telling to some degree. It tells you the market believes as I do. That things will get worked out somehow. There's just too much on the line including the action of the stock market. If the debt ceiling isn't properly taken care of we won't be thinking about the 1600's on the S&P 500. We'll be thinking lower than that. Each day we go without a deal after the 17th the harder we'll fall. If we can hold up above 1683 down to 1677, and then get a deal, it is possible we'll get back towards 1730.

In the meantime keep it light until we get total clarity.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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