Expecting A Stock Market Bloodbath On Monday

Stock markets will likely decline on Monday due to an impending US Government Shutdown

It is Sunday evening, 10:45 PM EST and I believe that stock markets will become a total complete bloodbath Monday morning. We left stock markets last Friday with a .46% decline for the S&P 500 (SPY), a .46% decline for the Dow Jones Industrial Average, and a .15% decline for the NASDAQ 100 (NASDAQ:QQQ). We also left stock markets last Friday with an obtuse Congress that still has yet to pass a bill which will keep the US Government open past Monday, September 30th.

The bigger issue, notwithstanding the fact that over 800,000 US Government employees will not be able return to work on Tuesday if Congress fails, is the impending debt ceiling debate that must be resolved by October 17th. But for Monday, September 30th, I think the political gridlock will continue to bleed out stock markets until a resolution is made (if one is made at all). If Congress fails to act by Midnight tomorrow night, I think we can count on more stock market blood on Tuesday too.

World markets are not too happy either, as evidenced by both Asian and European futures markets trading in the deep red at time of this writing. Additionally, we are due for a Chicago Fed National Index report and a Markit Flash PMI report tomorrow, which could add to the doom and gloom, but not likely. All eyes appear to be on Congress for now.

From a technical perspective, the S&P 500 is close to hitting its 50 day moving average, which will likely provide a strong floor of support should things get really bad. The S&P 500 also has a negative MACD (-0.105) and a declining RSI, so it is likely that only a miracle tomorrow will stop the overall bearish tendencies of equity markets, especially considering the current soap opera in Congress.

Bottom Line: I predict a bloodbath for stock markets on Monday, September 30th 2013, with the chance of good news coming out of Congress equal to zero until the wee hours of Tuesday morning. Until then, have a great trading day!

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