Toying with Resistance

Markets want to go higher but unfortunately some headwinds are still causing hesitation. Investors are still waiting on Congressional leaders to resolve the debt ceiling issue. Will they get it done before the US falls into a technical default and has its AAA credit rating tarnished or will they prove inept.

Fed Chair Ben Bernanke is pumping an enormous amount of liquidity into the money supply system. Since the Quantitative Easing Program ended at the end of June, Bernanke has come up with more creative methods of putting money into our economy. He is doing his part to keep the bubble from bursting.

Treasury Secretary Tim Geithner is rumored to want to retire soon. He is furiously making the rounds attempting to push Congress to act urgently before we run short on money in 11 days. This is his one and done moment. He only needs Congress to cooperate.

The markets are not panicked. Stocks are flirting with recovery highs and the bond market is stable. Treasuries are not acting like interest rates are about to go up sharply.

Technically, stocks are at resistance and are poised to break higher should the House, Senate, and the President all agree on a comprise in time. Corporate earnings and even some of the recent economic releases have been quite positive. The trouble is other issues have been dominating center stage.

Europe may finally move out of the forefront with their Greek solution and the tempering of the problems facing other Euro zone nations. If only our leaders could agree that more immediate debt is a good solution, then we too could push our troubles off to sometime in the future.

Markets would most likely go on a tear for the second half of the year. That would coincide with what typically happens during the third year of a Presidents term. If the S&P 500 clears 1370 from it Friday’s close of 1347 – it would target 1483 or even go all the way back to the 2007 all time high of 1576.

NASDAQ is also poised to take off. It closed at 2862. There is major resistance here to 2887. Should it clear that level, the NASDAQ would target 3175 as its next objective. That would get the NASDAQ all the way back to its December 2000 levels.

Like it or not the government will raise the debt limit. If they get it done sooner the markets are poised to go higher. If they wait until after August 2^nd, and a downgrade of our credit rating, then this will be a resistance point that forces stock prices lower. We will have a much better picture in a week.