Wednesday, July 27, 2011
Debt Ceiling
If everyone expects the US debt ceiling to be raised, and most people expect a rally on that news, how long can that rally last? Especially when we rallied all of last week because of European bailout goodies and a debt ceiling deal. Will we even have a rally after the debt ceiling is raised with the possible S&P downgrade of US debt to AA looming? I don't suggest that one should play the short side, but going long at current levels entails a risk of even lower prices after the news comes out.
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9 comments:
A close under 1300 today sets up a potential slide that could rival May 2010. the only savior for bulls now would be a long term cap increase by at least 2-3 trillion. Markets are now pricing in the inevitable downgrade to AA.
The downgrade is not a big deal because it would be temporary...everyone knows this.
Still I'm sure the markets would sell off a bit more on the initial downgrade.
A buying opp.
If everyone knows this doesn't that imply that "everyone" is wrong
At least yesterday's decline would appear to have taken a 'sell the news' reaction off the table.
At 1300, there isn't much of an edge either way, although slight edge to longs because we are beginning to price in a S&P downgrade of US debt. Debt ceiling isn't the issue, it is whether the deal will satisfy the ratings agencies.
US will be downgraded. There is no question.
I see a dump tomorrow and then I see a squeeze on the announcement, a downgrade, a sharp selloff.. and then markets bid for rest of summer just because the s&p is pegged to dollar fx to eternity. Strap on them seatbelts it gonna be crazy next few days!
I love this blog, and I'm sad that there will be fewer posts. But I have one comment concerning this. What if the market volatility does NOT drop, and the market does NOT slow down and tighten over the next couple of months? Just because you predict this will happen, doesn't mean it WILL happen. Will you still cut down on your posts even if the market's daily volatity begins to get crazy over the next month or two?
If the market is volatile, I will make more posts. I don't think the volatility based on headlines will last. Once the debt ceiling and downgrade news goes to the rear view mirror, the market will lift and volatility will die out.
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