President Obama won’t cave in on the Debt Ceiling debate. One, he isn’t running for re-election. Two and most important, this is about the future of the Presidency, not about Obama or Obamacare. No opposition party should use an issue as critical as raising the debt ceiling to avoid default as a lever to gain what it hasn’t been able to achieve through normal channels.
This could be a Republican president, and if Obama caves this time as he mistakenly did in 2011, this unproductive, disruptive, divisive, and destructive process of holding the office of president hostage will go forward indefinitely.
President Obama knows this, and for the future of the office, must stand firm. If the opposition (Republicans and Tea Party) have a problem, Both houses of Congress can reinstate the government, raise the debt ceiling and take the fight out to the parking lot where it belongs.
While the U.S. House could vote on a clean bill to end the shutdown and on one to raise the debt limit, the depth of ideological differences make that difficult, ergo a standoff that can’t be resolved until monumental outside pressure forces it on the weekend of the 19th and 20th, two days after the dealine.
Expect a news whipsaw to generate volatility in both directions, There will be well-publicized meetings, secret meetings, rumors, misleading comments in government, on talk shows, the press and by highly visible people. Rating agencies will put the U.S. on notice of a possible downgrade. The doomsters will crawl out from under their rocks to preach doom and I told you so.
All this pre-solution stuff is misleading clutter, causing investors to jump in then back out prematurely, losing money and getting too discouraged to act when the market goes into its final plunge. One day, a deal will look like a good bet, the next day a bad bet (whipsaw).
This is going down to and beyond the wire, these parties are far apart and no one plans to blink.
If Treasury Secretary Lew says the 17th is the drop dead deadline, I have a tough time believing there isn’t a tiny bit of wiggle room just in case, clearly enough to get through the weekend and early the following week.
The Street is taking this crisis too lightly, confident a deal will be struck, just because failure to do so would roil financial markets worldwide and disrupt corporate and consumer spending plans.
That makes a lot of sense and odds actually favor it.
But, the Street may have it wrong this time. How do you program all those Wall Street computers to make sense about what is happening in Washington ? Not even a computer would believe it.
BIG BUYING OPPORTUNITY
I am viewing this as a BIG buying opportunity. All the negatives I referred to above serve to set up this opportunity which will come swiftly, overnight and trigger a huge gap open the day after an agreement is reached.
Odds favor the debt ceiling deadline will be breached for only a couple days, enabling enough face saving and pressure from all directions to strike a deal. They will hear it from the BIG money, BIG business and BIG funders going into that weekend, and most of it won’t be printable.
These Congressmen and women may be big deals in the districts they represent, but that is where it ends. There is a low-visibility element out there with too much to lose, it won’t put up with this self-serving, narrow-focus ineptness and it WILL be heard, and listened to, if the deadline is breached.
Presently, I see an intraday low for the debt ceiling crisis taking the DJIA down to 12,760 ( S&P 500: 1,430) on Friday, October 19 before an agreement is reached over the weekend with a huge gap up open on Monday Oct. 21 with a rise of 275 to 325 points in the DJIA.
If events don’t break as I see them, I will have to alter my position. I am alone on this, but I was mostly alone on March 10, 2009 with my “buy” when the bear market bottomed.
TECHNICAL OBSERVATION – STOCKS: NEW FORMAT
I am streamlining this format in order to include more stocks.
The following are observations based solely on technical analysis and don’t give consideration to fundamentals or changes in brokerage ratings, earnings guidance/projections, breaking news, which can have an immediate impact on stocks, justified or not. The object here is to sense forces of supply and demand for the stock which affect support and resistance levels frequently.
These are not buy or sell recommendations, and are not stocks I have recommended.
STOCKS OF GENERAL INTEREST:
Note: Currently, there is the potential for sharp moves in stocks in response to developments in Washington. Under these conditions, support/resistance levels are especially suspect.
I have added a “debt ceiling crisis” risk level for each stock, a price where these stocks could drop to if the debt ceiling decision goes down to the wire and fear escalates.
Apple (AAPL: $489,56) Positive.
Carl Ichan’s comments pressuring management to undertake a big stock buy-back drove it higher again yesterday ending a five-day correction and paving the way for a move across $500 (Congress permitting). Support $488, Resistance $492
Debt ceiling crisis risk: $465
Facebook (FB: $50.28) Positive.
Consolidating between $49.50 and $51.50. A little selling showing up
Debt ceiling crisis risk: $46.50
IBM (IBM: $184.96) Positive.
Wrong read. Yes, a buyer showed up Tuesday but wasn’t there yesterday and IBM is still probing for a solid base which may have to come closer to $182. Stock needs big buyer to prevent this. Move across $187 gives it a shot at $190. Debt ceiling crisis risk: $175
Pulte Homes (PHM: $16.91) Positive.
Support at $16.50 held and PHM is looking good coming out of 9-day consolidation.. Expect a trading range between $16.50 and $17.50 for a few days..
Debt ceiling crisis risk: $12.80
First Solar (FSLR:$42.98) Positive, up from neutral with move across $42.
Big move secured a base formation and potential to work its way up to $43 – $45. Support now $42.
Debt ceiling crisis risk: $37.20
Target (TGT: $63.65) Negative.
Found a buyer a fraction below $63.67. Still struggling in a sloppy base formation. Needs big buyer, which can happen if economy gains traction. What is the message here ? Consumer temporarily tapped out ?
Debt ceiling crisis risk: $59.60.
Hewlett-Packard (HPQ: $21.40) Negative.
Wow ! Two good days in an improving base formation. If overall market permits, HPQ could move up higher. Really needs some institutional support – positive research report – aggressive bargain hunter ( if justified). Break below $21 suggests drop to $19.
Debt ceiling crisis risk: $17.90
EBAY (EBAY: $55.63) Positive.
Attempt to sell off was met by a buyer at support $55.11. Support moves up to $55.27. Resistance is $56 – $57.
Debt ceiling crisis risk: $54.60
Amazon (AMZN: $320.51) Positive.
Looks ready for a breakout above $322 to $325 – $330. Debt ceiling crisis risk: $303.
STOCKS SHOWING ATTRACTIVE or UGLY TECHNICAL PATTERNS
ALSO NEW: This is intended to call attention to unusual technical activity. Will not be followed daily. I plan to introduce this feature in the near future. If possible, I will bring it out if the market takes a huge hit.
(NOTE:I do not own, nor am I short AAPL, FB, IBM, PHM, FSLR ,TGT, HPQ, EBAY, AMZN.)
ECONOMIC REPORTS: Another key week for reports on the economy.
The big news will be on jobs with the ADP report coming Wednesday and Employment Situation report coming Friday before the market opens.
For a detailed account of past and current economic reports, including charts go to: mam.econoday.com – www.mam.econoday.com
ADP Employment Report (8:15) Sept jobs added were 166,000 up from Aug 159,000 (revised down from 180,000. 180,000 were projected.
Fed’s Bernanke Speaks (3:00)
Jobless Claims (8:30) PROJ.: For week 9/28: 313,000
Bloomberg Consumer Comfort Ix. (9:45)
Factory Orders (10:00) PROJ.: Aug. +0.3pct. vs. drop of 0.3 pct. Jly.
ISM Non-Mfg. Ix. (10:00) PROJ.: Sept Index 57.0 vs. 58.6 in Aug.
Fed’s Fisher speaks (12:30)
Fed’s Powell speaks (12:45)
Employment Situation (8:30) PROJ.:Sept. 184,000 vs. 169,000 Aug., Unemployment 7.3 pct.
Fed’s Kocherlakota speaks (1:45)