HedgeFundLive.com — For the past two weeks in a row, the broad indexes have ended trading at the end of the week at a break even, leaving traders with no real market direction. With news on Friday midnight that the government has dodged a shutdown, it will be interesting to see the market reaction on Monday. Investors, both concerned and unconcerned about the government shutdown, sought to use the 1995 Clinton-era shutdown as a precedent. The unconcerned argued that the market did not react too drastically in the past and should be no different now. I would like to contend however that we were financially stable in 1995 relative to today. With the S&P 500 lingering around the 500 levels, the market barely winced at the 3-week shutdown a decade and a half ago. In addition, we have since than initiated many government programs and as a nation have become over “leveraged” as evidence of our debt.
The market remains very mixed. On a technical level, I believe the market index may see a short-term correction in the ensuing weeks before continuing higher. Support levels suggest the Dow Jones will find recovery at the 12250 level and the large 12000 level. MACD and stochastics show the index is weighted heavily and is currently in overbought territory. Inference from the NASDAQ is noticeably different – mainly caused by the surge of good earnings reports coming from tech stocks. This gives me a small reason to believe the Dow Jones and S&P 500 will follow the NASDAQ up and possibly breakout to higher highs in the next month. I conclude that I am slightly bullish to market neutral.
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