Thursday, October 10, 2013

Gaming the Debt Ceiling

My last post was about timing the debt ceiling.  Well, we got the momentary drop below 1650, but it lasted for all of 15 minutes, the 15 minutes of fame that bears are given in this kind of bull market.  It looks like there will be no panic ahead of the debt ceiling because frankly, everyone and their mom knows that a deal is coming before October 17.  So you are going to get the bottom a few days before that date.  No one wants to miss the debt ceiling deal rally.  And it shows in the sentiment numbers.  After the weakness we have seen over the past week, the AAII investors have increased their bearish opinion by 3.5%.  But they have also increased their bullish opinion by 3.5%!  These hardy dip buyers have not budged an inch during the weakness.  Now I see any debt ceiling rally as a potential fakeout before another move lower.

Yesterday's bottom will not be the one that will launch us to new all time highs.  If there is a short-term deal, that kicks the can for 6 weeks, we are back in the same situation all over again, and at that time, it will be the Republicans with all the leverage, because Obama has promised to negotiate once a short-term deal has passed.  So we will repeat this process all over again in 4 or 6 weeks, or whenever the next deadline is.

They finally got to the leaders over the past two days, seeing how FB, TSLA, NFLX, YELP, and company have gotten crushed.  I believe it is the pause that refreshes for this group and a good dip buying opportunity.  We will soon see all time highs for the aforementioned names.

1 comment:

MM111 said...

pretty good call :)