I want to share something with you. I am sick and tired of writing about this debt ceiling extension deadline and the political disaster in Washington. I am just as sure you are sick of hearing about it. Some of my comments here will repeat my market commentary.
Politicians need to have some sort of deal by Sunday night so one house can vote on it Monday and the other can pass it on Tuesday. If we don't see a deal the markets could see a pretty sharp plunge similar to what we saw when the TARP plan failed to pass the first time. If you forgot let me remind you that the Dow Industrials fell about 800 points on that news. What will really irk you is that even if lawmakers do get a deal done this weekend it does not mean the U.S. will avoid a downgrade. Depending on what's in the bill and how many spending cuts are passed the credit rating agencies could still downgrade the U.S. triple-A rating.
Combine the prospect of a U.S. rating downgrade with the terrible economic data (i.e. the Q2 GDP estimate) we just got this past week. Analysts are cutting their estimates for the second half. While Q2 earnings have been good the guidance has not. The next couple of months could be challenging for the stock market.
I am hopeful that we will see a debt deal this weekend but doubts are rapidly increasing. If we do see a deal it should at least be short-term bullish but we will have plenty of black clouds on the horizon. This could be a tough time to launch new long-term LEAPS positions given all the uncertainty.
We'll have to see if the bulls can once again try and climb the wall of worry.