The debt ceiling feels like an annual non-crisis crisis. I can't even count the number of times in my trading career I've heard the debt ceiling is going to bring the country to a standstill. Ironically, we've been able to operate just fine when the government comes to a standstill, so that should tell you all you need to know.
Each side of the aisle tries to leverage the debt ceiling to get something they want, and usually, it's the American population that pays the price.
Some traders may use it as an excuse to buy, sell or sit out the markets, but in my experience these conversations are nothing more than an excuse to make a move that's already in the cards based on the momentum of the market.
In the current environment, that probably means selling.
If it weren't for Microsoft (MSFT) lifting the market onto its back on Wednesday, things could look much worse heading into the trading session here on Thursday.
The Invesco QQQ Trust (QQQ) did get rejected right on the 10-day exponential moving average (EMA), so that becomes our primary level of resistance to watch. With the strong response to Meta Platform's (META) earnings, we may get another test today, but traders have been fading moves higher. Psychologically, we could use a close at the day's highs to carry some optimism into the following trading session.
After its strong results, I'm watching Alphabet (GOOGL) . Yes, the same Alphabet that reported Tuesday after the close. The stock traded flat yesterday after an initial pop in the after-hours session. Overall, numbers on the top line beat expectations and earnings surpassed analyst estimates by a dime, or nearly 10%. The results were far from perfect, but I'm intrigued by the $70 billion buyback announcement.
I'm watching for one of two scenarios to play out. The first, and more likely, is a test of the 50-day EMA around $101 a share. If that level holds, I expect we could bounce back into the $104-$105 area in quick fashion. The stock level buying around $101 would be tight. Traders should risk much below $100, which is a nice round level that often acts as psychological support. Should we close below $100, the wheels may come off and send us to the mid $90s.
The second scenario is the falling wedge pattern. A close over $106 would get Alphabet shares above the most pressing EMAs and over price resistance. New short-term highs would be the first target with possible follow-through upward of $115.
We're still struggling to find a clear overall direction in this market, but the bears have taken the upper hand. If you're buying dips, maintain some fresh powder and keep stops tight. You don't want to get caught pressing long plays if the bears seize full control.
