Debt Ceiling Issue Come Next

Debt Ceiling Issue Come Next

Right now the Stock market anxieties will turn to debt ceiling issues.

That is the talk of the town right now, and the next major hurdle for these markets.

Political risk. Democrats and Republicans are fighting again about the nation's finances. What's the risk? If they fail to pass a funding bill before the new fiscal year starts Oct. 1, a government "shutdown" is possible. And if they don't raise the debt ceiling in coming weeks, the nation could run out of money to pay its bills and default on its debts. It might be just rumours again, like we had with the fed tapering stuff.

How Congress and President Barack Obama deal with the debt ceiling is likely to determine market volatility for the rest of the year I think.

Now that the expected tapering of $85 billion a month in asset purchases fizzled out at the Federal Reserve’s September policy meeting, investor attention has shifted to the brewing showdown over the budget and the debt ceiling.

The Congressional Budget Office sees U.S. debt at 100% of GDP by 2038 at current budget rates.
Adding to pressure is a Congressional Budget Office report in the past week showing that national debt is now 73% of GDP and that the federal budget “cannot be sustained indefinitely.” So when you look at the RUSSELL weekly chart below, things do not add up. But then again, when you do some heavy research, and the TRUTH comes out to how the real crisis in 2008 started, you would not believe your eyes.

RUSSEL 2000 WEEKLY CHART!

RUSSEL 2000 WEEKLY CHART!

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Bernanke might postpone tapering

Bernanke might postpone tapering ?

The Bernank may delay his plan to taper bond purchases past September, as investors expect, because I have noticed a surge in interest rates this week. It is something Bernanke is watching, and will react too.

Alot of traders I believe are not reading the signs right. Many analysts are saying tapering is coming, however you have to remember that simply nothing at all is currently being done, and all this market movement is due to one thing - RUMORS, RUMORS and more RUMORS.

 Ok, I will be the first to admit, rumors are always going to move the market any day of the week. However this is a big one as we are talking about a massive stimulus program that has been going on for year now. I doubt the economy is good enough for the rumors to be bought off the table and for tapering to come in quickly. Infact, I would say that looking at the dow jones chart below, the market is already pricing in tapering if indeed it does happen or even if it doesn't.

Bernanke might postpone tapering

I think that this selling off will also slow down the amount of tapering that COULD occur and I underline that word COULD! Right now it seems every time Bernanke sits down at capitol hill, he is just blowing steam up everyone's arse. He keeps hinting that he will take action, but my interpretation on that is that things are not good enough for him to even take the most minute of action.

I don't think that Bernanke is going to be held hostage to the bond market, and the fed right now knows that rumors can really get this market moving, so imagine if they actually had to do something.

The Fed has been buying $85 billion in treasuries and mortgage-backed securities each month in an effort to reduce interest rates. This is all part of the central bank's quantitative easing, or QE3, plan. Stock and bond market investors expect the Fed chief to slow this process as early as September but we might not see anything until the new year. Its all talk and BS in my opinion.

But again, these dates and all this BS from the Fed is just making me think there is something much bigger going on here. I mean, nothing has actually been done, and the economy is not doing that well. Or well enough for them to start taking action. This is a repeating pattern, like a cycle that is getting traders on the wrong side of the trade! But most of the big boys love it when you are on the wrong side of the trade, it means it makes their job alot easier.


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Dow Jones Transports Chart - Steady As She Goes Captain

The Leader of the market or the (DOW JONES TRANSPORTS) chart is showing that since March of this year 2013 it has been in a larger upwards channel. Interestingly enough we have been bouncing off that line over the last few days however we did not breach that line, and that is telling us that the market still has some sort of strength even though there has been rumors of the fed talking about culling of the quantitative easing and liquidity pumping up of the markets.

It is obvious to me that there are head winds for the markets over the next few weeks, but that does not mean a thing as technically we have not breached the risisng support line, so until that happens there is no need to panic.

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