Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
The politicians can not agree on anything other than kicking the can down the road. Word surfaced late yesterday the 2 parties may “agree” to kick the can down the road – solving nothing other than avoiding the debt ceiling limit as they work towards a broader “comprehensive” solution. This is the exact same thing they have been saying the past half decade, and each time they try to work on something comprehensive the only thing that comes out of it, is more can kicking. But that could be enough for markets. Futures are jumping on the development and we always have to ask in the QE market is this sort of gap up is day 1 of a “V shaped” move. It has now become common. There is now a world of resistance to work through on the charts but the QE V shaped rallies never worry about resistance and just seem to slice through it as if it is no there. We’ll know in a week or so if this is another one.
Note the last 2 times the S&P 500 broke a downtrend it led to a fast supercharged rally – but an eventual selloff. At this point simply to break the current downtrend, the index would net to get over S&P 1680. Also note the 50 day moving average is sloping downward for the first time in a long time; in fact the first time since late 2012. In normal markets that is usually a cautionary signal but in a QE world these signals have not been as helpful.
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