Stock Market Analysis

Wednesday, October 16, 2013

Buying Ahead of Debt Ceiling Raise

The Dow gained over 200 points today on anticipation of a debt ceiling raise.

Fundamentals
There are almost no uncertainties surrounding the raising of the debt ceiling as investors pushed the Dow up by 205 points in anticipation of a resolution within these two days. Indeed, after market news confirmed that the US government has reached an agreement to raise the debt ceiling through Feb 7 and end the government shutdown. This is hardly a surprise and raising the debt ceiling through Feb 7 really does nothing to reverse the damage already done by the half month long government shutdown and does nothing to change the fact that economic data is turning in dismal of late with housing data and empire state index slumping. As such, I would actually expect to see some profit taking into this already priced in outcome tomorrow rather than exuberance.

Technicals
The Dow seems to be stuck in some kind of volatile sideways channel since May with very limited upside. Indeed, the old adage Sell In May and Go Away seems to be working again this year. What usually follows such sideways trends is a significant bear trend especially if the Dow fails to meet or better the previous high around 15,500. With so much headwind and uncertainties ahead in terms of the fundamentals and the Hindenburg Omen shining ever so bright, this is one market that requires alot of agility and skill to win in. However, my Master's Stock Options Picks subscribers still managed to take in a good 48.5% profit on BAX call options today.

For now, the Dow turns a short term bull trend within an intermediate and primary neutral trend.

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