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Date: October 21, 2013
Subject: Get Ready to Sell on the Debt Ceiling News

This is
G&G Associates
e-Newsletter
 
Get Ready to Sell on the Debt Ceiling News
 
Hotep G&G Readers,
 
The market has it backwards.

For the past couple weeks, stocks have been waffling back and forth on news over the debt ceiling. The market falls whenever we got news that the president and the House of Representatives were too far apart to reach a deal. Stocks rallied when we heard rumors that a deal was coming together.

News of an agreement last week pushed the S&P 500 20 points higher. The consensus thinking is that once an agreement was signed and the debt ceiling was raised, we'll go on with business as usual … And stocks will move higher.

But ... that's not how it worked in 2011 – the last time we dealt with the debt ceiling.

Back then, stocks were just as volatile as today – rallying on news of a possible deal, and falling when the deal fell through. And the consensus thinking was pretty much like this time – the debt ceiling would be raised and stocks would rally.

But the consensus was wrong. Here's what happened …
 
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The stock market waffled back and forth for most of July 2011, as Congress and President Obama tried to hash out a deal. They signed a deal to raise the debt ceiling by $2.1 trillion on August 1, 2011.

Rather than rallying on the news, stocks sold off. In fact, they collapsed. The S&P 500 lost 12% in just one week.
 
Something similar could be on tap this time around.

Last week, before the debt ceiling news, based on the McClellan Oscillator, the S&P 500 rallied more that 60 points. Telling me ...
 
Stocks aren't oversold anymore. They're closer to being overbought. Investors have been anticipating a debt ceiling deal to come out of Washington. And they were buying stocks in anticipation of the deal getting signed.

But if things play out like they did in 2011, traders should get ready to sell on this news instead.

 
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Good Investing!

Ankh Uja Snb (Life, Health & Strength)
Asar Maa Ra Gray
Tax & Financial Consultant, RFC
G&G Associates
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LEGAL NOTICE: This work is based on what I’ve learned as a financial researcher and analyst based SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. It may contain errors and you should not base investment decisions solely on what you read here.  It’s your money and your responsibility.  Nothing herein should be considered personalized investment advice.

 

 

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