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Possible Deal in Washington

Possible Deal in Washington

"White House" by Damian Brandon on freedigitalphotos.net

Hooray!

It seems as though there might be a compromise in Washington if the leaders of both parties invoke their silver tongues and persuade their colleagues that this compromise is the right thing to do.

I am monitoring the asian markets and the U.S. futures right now and it looks like peopel are scrambling to cover their shorts. That is the only action that makes sense at this point. The debt ceiling hasn’t been raised and there is absolutely no reason to buy stocks at this point. There is reason to cover a negative bet because the odds for a compromise just went up. If someone has well positioned enough to take on a long position on Friday, I would sell into the rally on Monday. I am willing to bet that some negative news will come out and allow you to buy those shares back lower if you absolutely believe a deal will be done.

First Half GDP

We saw some extremely weak first half GDP numbers last week. What’s the deal here? Was the end of stimulus a brick wall? The stock market is telling us either no or it doesn’t care. What do I mean by that? Well, we are about 6% from the 52 week high in the S&P. What this tels me is that the market either believes that GDP will rise in the second half, or another round of stimulus is coming. Lets look at a few sector ETFs to get a better idea of how those sectors have performed lately. The Retail HOLDRS Trust (RTH) is around 5.4% from its 52 week high. The Oil Service HOLDRS Trust (OIH) is around 6% from its 52 week high. The Vanguard REIT ETF (VNQ) is around 3.7% of its 52 week high. The SPDR Select Sector Technology ETF (XLK) is around 5% from its 52 week high. The PowerShares Dynamic Food and Beverage ETF (PBJ) is around 4.3% from its 52 week high.

This isn’t an exhaustive list, but it gives a pretty good snapshot of the big picture. There are no signs that we should panic at this point. People are shopping, the oil complex is fine, commercial real estate is fine, technology is fine, and people are going out to eat. I am keeping an eye on many of the major sector ETFs for lower highs and lower lows. Until those trends show themselves, I won’t worry too much about the GDP numbers.

Hope

Lets keep hope alive. Please raise the debt ceiling and avoid an unprecedented default by this great country.

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