Well, after The Midas Legacy Market Trend Alert flickered red for a couple of days last week, thanks to the politicians, things were back on course until faced with this Thursday’s debt ceiling problem, now things look shaky again today with the IMF warning of a severe global recession unless the US debt limit is raised.
We truly have painted ourselves into a preposterous corner if peace on Earth revolves around an already hopelessly indebted country (that would be us) borrowing even more money. Is this nonsense sustainable? No.
So what’s going on? What you should do next…?
Well, let’s look at the big picture, quite literally. Here’s a chart of the S+P going back two years:
Source: Stockcharts.com
The blue line is the moving average price of 30 weeks, and as you can see, the S+P, after a close call last week, is comfortably above it. What’s more, the moving average is still pointing decidedly upwards, another good sign. The market refused to fall down below its past trend last week, and as I commentated on recently, it also dodged a bullet by negating a potential head and shoulders (bearish) formation.
In short, this is a market that wants to go UP.
Expect turbulence until this debt ceiling issue is resolved, but once it is resolved, we could be all set for that customary November/December rally, maybe even an explosive one after all the ‘catch-up’ many fund managers will want to do for lost time.
But let’s just wait and see with our finger on the trigger, as anything can happen. The GOP already saw their approval rating smashed last week as a result of all their protesting, that’s why I never thought they’d do what they did, because it would politically backfire, and that the GOP was likely to sign a last minute deal. I was wrong on that one. Silly me, I assumed politicians weren’t that stupid. When will I learn…?
Best,
Jim.
