Thursday Thrust – Limitless Debt Re-Energizes the Market

No more debt (ceiling)!

That's certainly worth celebrating and the indexes are up 1% pre-market and already popped half a point yesterday as word spread that the Republicans offered a short-term debt-limit extension – so the Government won't go Bankrupt until December! That MUST mean it's party time in October, right?

We are indeed partying like it's 1999 with the S&P 500 racing back to 4,400 but we'll see if it sticks, as what matters is where we finish the week. We'll see if the Nasdaq can get back over 15,000 as well but a rally is a rally so we simply have to wait and see if this enthusiasm fades or not. Keep in mind, the debt ceiling doesn’t authorize new spending, it only allows the Treasury to raise money to pay for expenses the government has previously authorized. Is that really something to rally about – that we are able to pay our bills for two more months by borrowing more money?

The markets seem to think so:

S&P 4,550 to 4,300 was a 250-point drop so 50-point bounce lines are 4,350 (weak) and 4,400 (strong)
Dow 35,500 to 33,600 was a 2,000-point drop so the bounce lines are 34,000 (weak) and 34,400 (strong)
Nasdaq 15,700 to 14,740 was a 960-point drop so call it 200-point bounces to 14,940 (weak) and 15,140 (strong)
Russell 2,580 to 2,150 was a 430-point drop so 90-point bounces to 2,240 (weak) and 2,330 (strong)

That's a big improvement for the week but still work to be done as we have only hit the strong bounce line on the Dow so far. We'll see how things go tomorrow but extending the debt ceiling doesn't change anything fundamentally – we knew they'd end up borrowing more money somehow.

Also improving on the virus front is less than 2,000 people per day are dying this week and just over 100,000 people per day are getting infected – only 3M people per month! While that still makes America about 4x worse than any other country on the planet, it's a lot better than it was last month so breath a sigh of relief (through a mask!). One out of 4 people in the World catching Covid or dying from it are Americans – you've gotta be proud of that statistic, right?

Oil tested $75 early this morning but bounced right off that – it was also the $80 line on Brent (/BZ) – so it was obviously going to be bouncy (we cashed out yesterday at $77.50). Natural Gas dropped $1 in one day and that's a $10,000 per contract swing on the /NG futures – that's why we don't mess around with /NG unless we are VERY confident!

The Dollar is up 2.5% for the month of September so it's possible the market weakness is just a reaction to that and that's being caused by the general consensus that the Fed is going to tighten at some point and the Government will stop printing (as much) money – at some point.

Until that time, let's just sit back and enjoy the rally.

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