Despite the endless headlines about the disaster that lies ahead if the debt ceiling fails, the market is holding up extremely well. There seems to be a view that the talks will be contentious, but the deal will be done at the last minute.
Market players started getting a little nervous about the deal on Tuesday, and it’s getting some attention today. One of the problems is that there is no clear deadline. There is talk that June 1 is the “X” day, but work is being done on “extraordinary” measures that can extend the deadline by weeks. If the Ministry of Finance can reach June 15, there will be a large influx of tax payments, which will ensure sufficient liquidity even longer.
The prospect that this wretched debate could drag on for weeks is adding further selling pressure. There was a feeling that there would be an upside when the deal was done, and it could be a good selling opportunity, but the bears don’t want to wait. They are now ramping up their sales because the debt ceiling problem has no end in sight.
Large-cap tech names are also losing their safe-haven status. They still show some relative strength, but it’s cooling off. Latitude is doing very poorly today, with about four declines for every advance. The Nasdaq 100 breadth had 22 winners versus 80 losers.
The number of new 12-month lows is still very mild at just over 100, but it will widen quickly if this action continues.
I’m looking to buy some pullbacks but I’m in no rush. This appears to be a trend reversal developing, and even the debt ceiling deal may only be a temporary reprieve as it gains traction.
Get an email notification every time I write an article for Real Money. Click the +Follow button next to my bar in this article.
[ad_2]