By seadmin
A deal on lifting the debt ceiling is getting close, and though the details have yet to be worked through, we are approaching the removal of a potential default from the list of worries the markets face right now.
As I’ve told you in recent weeks, I always thought that there would be a deal reached that allows the government to keep borrowing more and more money. That’s not a good thing in the long run, but at least in the short run a sidestepping of any potential default, and an avoidance of any credit rating downgrade by Moody’s or Standard & Poor’s, is something both the equity and bond markets need.
If we look at the reaction to what’s happening in Washington right now, we see that stocks are up, bond yields have settled down, and the U.S. dollar has begun to form a base after some volatile trade.
The charts here of the S&P 500, the 30-Year Treasury Bond Yield and the U.S. Dollar Index tell the tale of a market that’s holding up pretty well to current barrage of negative exogenous conditions.
By monitoring the tire pressure on each of these key market wheels going forward, we can get a good sense of where traders are with respect to the overhangs in the market such as the debt ceiling deal and European debt issues.
Monitoring these indicators also will give us a sense of how the market is responding to outstanding metrics such as Tuesday’s earnings report from personal technology giant Apple (AAPL). The company just crushed earnings expectations with a huge beat, proving once again that consumers are willing to pay for outstanding products that they perceive to be enhancing their lives.
The reaction in the market to Apple’s great numbers, as well as the encouraging signs of a deal on the debt ceiling, are good for the bulls. I think we are liable to see more buying in stocks here soon, especially when the deal is officially in place, and as corporate earnings continue to come in strong.
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