A Barely Green Day For Stock Markets

Stock markets might just finish in the green (barely!)

I predict a green day (barely) for stock markets on Tuesday, despite the fact that over 800,000 people will lose their jobs and that Congress failed to keep the US Government open.

Yesterday (Monday) was a day in the red for stock markets, with the DJIA (DIA) losing .46%, the S&P 500 (SPY) losing .60%, and the NASDAQ 100 (QQQ) losing .27%.

I am calling a barely green day for stock markets because every other investor in the world appears to feel that Congress will re-open the US Government quickly, which would immediately take any tension off of the table. I also believe that most investors do not quite understand the gravity of the situation, considering that only essential government entities (the military, law enforcement) will remain open and the 800,000 jobs were lost in less than 24 hours. So, for those 800,000 people I hope that Congress does fix this quickly, and when the US Government does re-open again, we will likely see a huge rally.

Worldwide, European markets closed in the red (no surprises there) and Asian markets are in the green as of this writing. Furthermore, US futures markets are curiously in the green right now, suggesting that we may be looking at a green day tomorrow despite all of the negative news to say otherwise. As long as investors appear bullish, I will remain bullish on this issue.

Technically, the S&P 500 (SPY) is extremely close to its 50 day moving average, which should provide a solid support level, unless of course investors start to believe that Congress is not joking around. The RSI is neutral and the MACD is still negative, but even so, I think we could see a slight bounce tomorrow due to the presence of the 50 day moving average as a support level and due to the notion that investors are still not sure where things are going next (at least not yet).

We are also due for new Construction Spending, ISM, Markit PMI, CoreLogic Home Price Index, and Motor Vehicles Sales reports, if anyone cares about anything else but the Congressional soap opera.

Bottom line: Today’s stock market may just be a case of “buy the rumor, sell the news,” and I do not believe that investors fully understand what just happened in DC. For that reason, I predict a bounce back into the green, albeit barely, until either investors realize that the government is shut down for a good while or until Congress re-opens it. Additionally, the bigger battle is yet to come with the debt ceiling debate set for October 17th.

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