Despite endless headlines about the disaster that awaits if a debt ceiling day is not made, the market has been holding up extremely well. There appears to be a view that the negotiations will be contentious, but a deal will be made at the last minute.
On Tuesday, market players started to grow a little nervous about a deal, and that is gaining some traction today. One of the problems is that there isn't a clear deadline. There is talk that June 1 is the "X" date, but there is work being done on "extraordinary" measures which could extend the deadline for weeks. If the Treasury Department can make it to June 15, there is a big inflow of tax payments that will provide sufficient liquidity for even longer.
The prospect that this miserable debate could drag out for weeks is causing additional selling pressure. There was a view that there would be a spike when a deal with made, and that might be a good selling opportunity, but the bears don't want to wait. They are increasing their sales now because there is no end in sight to the debt ceiling issue.
Big-cap technology names are also losing some of their safe haven status. They are still exhibiting some relative strength, but it is cooling off. Breadth is running very poorly today, with about four declines for each advancer. Nasdaq 100 breadth is 22 gainers to 80 losers.
The number of new 12-month lows is still very mild at a little over 100, but that will expand quickly if this action continues.
I'm looking to buy some pullbacks, but I am in no rush. This feels like a shift in trend is developing, and even a debt ceiling deal may only be a temporary respite as it gains traction.