Friday, October 11, 2013

6 Week Temporary Debt Limit Increase

[Previous post: Tough Business Conditions - NOL, Vard Holdings]

Debt-Ceiling Increased Temporarily
As of 1am Singapore time, the Dow and S&P 500 had rallied more than 1.5% to pare some of the heavy losses sustained over the past 2 weeks. Republicans agree to increase the debt ceiling for 6 weeks in an attempt to come to a compromise with Obama's administration.

The optimistic
  • Equities will rally to pare losses over the last 2 weeks temporarily
  • A debt deal is still plausible so there is a chance market will trend even higher after these 6 weeks
  • Bond-buying program from Fed will even less likely be removed in this period
  • Amid all the news, Janet Yellen has been nominated to take over Fed chairperson role. Hurray to stimulus.
The pessimistic
  • Yet another 6 weeks of volatility in addition to Fed's inconclusive Sept meeting
  • Economic data will start coming in after 2 weeks of delay
  • Still a good chance of yet another shutdown


Expect the STI to rally back to 3260 level where it should face strong resistance. It represents a rise of 2.9% on current day's close. Thereafter, the realisation of the increased volatility and uncertainty over the next 6 weeks should set in and revert markets lower.

  • MACD - is postive and trending upwards. Crossing signal line soon.
  • RSI (25d) - rebounding off 50% towards 70%
  • Cross 20 and 50DMA. Yet another slightly bullish sign, value of STI is seen overcoming the 50DMA and trending to the 20DMA.

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