As we enter week two of the partial government shutdown showdown, there is much more chatter about the prolonged negotiations lasting even throughout the upcoming weekend, following this weekend’s media blitz by both sides of the aisle. Boehner not backing down at all (publicly); Boehner refused to schedule votes on either the CR or debt ceiling until Obama and Reid sit down and negotiate. Boehner says there aren’t enough votes to pass a “clean” CR in the House; he insists Obama and Reid will need to negotiate. And President Obama says they aren’t going to negotiate. One option being discussed behind the scenes is a 6-week bill to fund the government and raise the debt ceiling; the brief interlude would theoretically allow enough time for a “grand bargain” deal to be struck. We say all in due time … it’s all about the parties getting their deals inked!
This week in history: Worst Dow week in the history of Wall Street. The [DJIA] lost 1847 points or 18.2% during the week ending 10/10/08. stockmarketwhisperer > wow…we have a crash timeframe coming between next week and nov 5th, but nothing like THAT I don’t think… william_blount offered: it’s the 11th anniversary of the 2002 LOW, 6th anniversary of 2007 hi, 5th anniversary of the 2008 MOMENTUM LOW (the whole darn crash momo low) = SIGNIFICANCE OF THIS WEEK. Also, the BRADLEY MODEL center date is tomorrow — polarity unknown — standard deviation wide enough to drive a mac truck thru it.
stockmarketwhisperer (00:32) posted shortly after midnight CT: Another volatile week ahead…so have to take it one day at a time…First off let’s watch if 1670 breaks or not today...as there’s downside pressure until 10:30-11AM where a positive moves in…may not last, but some sort of mood changes at this time will be fast but tradable. I don’t expect any resolve from Washington this week…too much pressure. Only phony (dishonest) deals and headlines will be out THIS week, but they will move markets none the less. Any ‘rallies’ are of the ‘top and drop’ variety and are not to be trusted THIS week. Chop!
The antagonist in me…says the Tea Party/Republicans shared their shutdown game plan with the FOMC, thus the surprise no tapering at last month’s meeting. On Wednesday we get to see who voted for what following the Fed’s most recent messages regarding the very close decision not to taper last month, which in fact followed Fed Chairman Bernanke and the Fed governors echoing that tapering was on its way leading up to the Sept. 18 FOMC meeting…
This week we have [AA] officially kicking off earnings season and the FOMC minutes – assuming they are released. There are only a handful of independent economic reports that will be posted due to the shutdown – assuming the shutdown stays in effect. The U.S. economic release calendar will be pretty sparse with only initial jobless claims on Thursday 7:30CT & Michigan sentiment on Friday 8:55CT.
Corporate earnings: Barron’s says while the market is distracted by the drama surrounding the government shutdown, it would be wise to pay attention to corporate earnings, for which expectations are low; with help from an improving Europe, U.S. stocks with international exposure could be a bright spot in Q3. Alcoa kicks off the earnings season post close tomorrow and things pick up in earnest following Friday’s pre-market earnings from [JPM], [WBS] and [WFC]. Companies Rush to Lower Earnings Bar: A Record Number of Firms Are Giving Negative Guidance Ahead of Third-Quarter Earnings Season, but That May Not Bode Poorly for Stocks on Its Own — You’ve been warned. http://on.wsj.com/18TWTOK
This morning’s Our view: The S&P 500 is going to face another week of increased volatility. Part of trading is being able to face your fears, and right now investors are very nervous as the budget battle drags on and the debt ceiling deadline looms. The nervousness definitely showed up in the [VIX] last week trading as high as 18.71 on Wednesday before settling at 16.74 last week, and it showed up in the sharply lower global equities this morning and the gap higher open at 18.76 in the VIX this morning. One thing for sure is we are going to see a big increase in headline news this week. The 1662, the 200-day moving average, followed by 1657 area are the lines in the sand. As we have always said, the markets dislike uncertainty and there continues to be a lot of that floating around these days. Roger_S offered: A positive sign of a rising VIX, as we idle awaiting Washington is that the market could be getting well-hedged.
Today started with 1669.20-1669.80 210k ESZ and 830k SPZ traded on Globex, ESZ trading range was 1678.25 – 1666.50. Friday’s regular trading hours (RTH’s), SPZ pit session trading range was 1685.50 – 1670.40 before settling 1684.80, up 15.1 handles. In Asia, 9 of 10 markets quoted closed lower: Shanghai Comp. +0.68%, Hang Seng -0.71%, Nikkei -1.22% and down 5% last week. In Europe, 9 of 12 markets were trading lower: DAX -0.93%, FTSE -0.95%.
Today’s December S&P 500 (SPZ) pit session opened 15 handles sharply lower to range 1669.20 – 1669.80, traded a low of 1668.00 before grinding 10 handles higher, printing 1678.70 and quietly fading back following the European close. Once again, for the most part traders and investors were sitting on the sidelines in an effort to avoid any headline risk out of Washington.
Midmorning, Jon Hilsenrath of the Wall Street Journal went on CNBC and said a December taper could still be on the board. Also, during the midmorning the equities lost their bid and quietly faded back to hold 1673 area before trending higher, printing a new intraday high of 1679.20 at 1:02 – short of 1681.50 upside pivot we have previously written of.
The SPZ was trading in the 1677 area when the early look of the closing imbalance showed (14:10) MiM – MrTopStep Imbalance Meter showing 65%, $132M to the buy side – and then reversed to a reading of 58%, a very small $82M to the sell side at 2:40 as a sell program ran through the final 45 minutes. At 2:47 the SPZ was trading in the 1671.50 area when the imbalance showed a modest $240M to sell. The cash close traded 1669.50 area and the SPZ went on to trade a new intraday low of 1667.20 before settling at 1667.70, down 17.1 handles.