Equity Markets Likely To Correct

Equity markets will likely correct today, snapping a five day losing streak for the S&P 500

Equity markets will likely correct themselves today due to oversold conditions, despite the potential for positive economic reports and movement within Congress.

All major indexes declined yesterday as predicted however, with the S&P 500 (SPY) losing .27%, the Dow Jones Industrial Average (DIA) losing .40%, and the NASDAQ Composite (QQQ) losing .19%, despite relatively positive durable goods orders, new home sales, and household debt reports.

Everyone appears focused on the continued Congressional gridlock, which today focused on Senator Ted Cruz’ 21 hour ”fake” fillabuster of the debt ceiling bill. Each Senator did vote to pass the bill to debate the debt ceiling bill however (which is odd), so now the Senate has the option to remove the anti-Obamacare clause and push the revised bill back to the House. This battle isn’t over yet, and it will likely come to a head this coming Monday. I would suggest that more Congressional infighting would spook markets further today, but now that the Democratically controlled Senate has the ball, tensions will likely ease for a day or two as the new bill is fleshed out.

Other news makers could propel equity markets further down today, including the Walmart (WMT) controversy regarding reduced supply buys and stockpiled merchandise. Walmart (WMT) quickly denied the claims, but investors didn’t buy it as the company’s stock fell sharply on Wednesday. I believe the retail behemoth is struggling alongside the rest of the United States’ retail (XRT) world. Just think about JC Penny (JCP) which is suffering a steep slide in its stock price, made worse today with Citi saying the floor on the stock is $1. (how do you spell bankruptcy? Sears has been pummeled, as well, however, in spite of this negative news, I maintain that equity markets are way too oversold and that some sort of tiny correction is in order for today.

Today we are also due for weekly jobless claims and a revised GDP report; jobless claims are expected to rise and the GDP report is expected to rise. Mixed news isn’t bad news at least, but a spike in jobless claims always has the potential to tank equity markets.

Bottom Line: I am expecting at least a dead cat bounce and most likely a bullish moment in equity markets today, despite the fact that the retail industry (XRT) and jobless claims may just ruin that prediction. With Congress at ease (sort of) for now and with a 5 day losing streak for the S&P 500 (SPY) I think some green on the screen is in order for Thursday, September 25th 2013.

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.