A Decline Ahead For Major Indexes?

Friday will likely be a red day for major indexes

Major indexes will likely suffer today, due to continued Congressional impasse heading into the weekend and the release of potentially dangerous economic reports.

Major indexes reversed their 5 day losing streak yesterday, with the S&P 500 gaining .35%, the Dow Jones Industrial Average (DIA) adding .36%, and the NASDAQ 100 (QQQ) rising .70%. Yesterday’s market “gains” were likely in response to the jobless claims report for the week of September 21st, indicating fewer jobless claims than the week before. Also, no major news, mishaps or breakthroughs were reported regarding the current Congressional impasse over the budget, although a poll by Bloomberg indicated that most Americans agreed to spending cuts alongside a debt ceiling increase. Suffice to say, yesterday did not have any “bad” bad news, so major indexes were actually allowed to even out.

Today, however, likely spells a different story. From a technical point of view, the S&P 500 (SPY) currently has a declining MACD (almost near zero) but a rising RSI, so it is really hard to tell just what the direction the index will go without looking at the fundamental picture. From a fundamental standpoint, I cannot see today going well for the Congressional debt debate, and I also do not see investors being bullish heading into the weekend with such political strife in the air. Unless Congress works a miracle and actually compromises on a comprehensive debt reduction bill, I think investors will be spooked all day long.

Tomorrow does however bring projected positive Personal Income and Consumer Spending reports, but it is clear that the retail industry isn’t doing so well, as seen from the likes of Walmart (WMT), Sears (SHLD), and JC Penny (JCP) in the past few days. Since retail activity (XRT) goes hand in hand with personal income and consumer spending, I would not be surprised if today’s Consumer Spending and Personal Income reports are off par, considering the recent negative rumbles from top retail (XRT) giants.

Lastly, European markets closed on the red side of mixed yesterday, and Asian markets appear to be holding even at the time of this writing. Major indexes falling on the red side of mixed appear to be the name of the game right now, and I think today will only further that trend, in the very best case scenario.

Bottom Line: I predict a red day today, mainly because of investor fear regarding Congressional bickering and a of lack of political “can-do” and compromise. Also, the dark storm cloud of the struggling retail sector continues to grow. Good luck trading and have a great weekend!

Disclaimer: The content included herein is for educational and informational purposes only, and readers agree to Wall Street Sector Selector's Disclaimer, Terms of Use, and Privacy Policy before accessing or using this or any other publication by Wall Street Sector Selector or Ridgeline Media Group, LLC.