Lance Roberts | Sep 30, 2021 07:05AM ET
This morning, market futures surged on hopes of a “continuing resolution” to avert a “shutdown.” Last night the Democrats appeared to buckle under the pressure of a looming “shutdown” with Chuck Schumer, Senate Majority Leader, suggesting a vote on a “Continuing Resolution (C.R.)” is forthcoming.
The C.R., a stop-gap measure in place of a budget, will provide funding for the government through Dec. 3rd. At that point, another C.R. will have to get passed to fund the rest of the fiscal year.
For the unfamiliar, before 2008, Congress would pass an actual budget itemizing spending needs that would get passed and funded. However, starting with the Obama administration, such arcane methods of managing government got dropped for the use of C.R.s instead, which take last year’s spending and adds 8% to it. Such is why debts and deficits started to increase beginning in 2008 and continues today.
The good news is that with the threat of a “debt default” and “shutdown” removed, stocks look to rally sharply this morning.
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Courtesy of Yahoo
h2 Stocks Holding Support At 100-DMA/h2The market held its 100-DMA yesterday as stocks mustered a very weak rally. Stocks need to muster a rally off of support and clear the 50-DMA next week if bulls are to maintain control. Otherwise, every day the market remains weak, the greater the potential for a larger breakdown becomes.
As noted below, while our “money-flow” buy signal is intact, the MACD has yet to confirm the bullish signal. Such keeps us cautious near term and does not preclude another down-leg in the market currently. However, with the Democrats ready to fund the Government through December, such should take pressure off of the markets near term.
h2 $14 Billion Into Quarter-End Pension Buying/h2While there are many reasons for the recent market volatility we mustn’t forget window dressing. At quarter-ends, money managers tend to “clean up” quarter-end holdings to appease client concerns. The recent uptick in inflation concerns, debt cap issues, and taper are reasons for said managers to sell some holdings and buy others.
It’s likely they will start buying back stocks and bonds today.
“With month- and quarter-end on deck, Goldman’s theoretical, “model-based” estimates are for a net $14 billion of US equities to buy from US pensions given the moves in equities and bonds over the month and quarter.
How does this stack up vs history? According to Goldman’s Gillian Hood, this ranks in the 36th percentile amongst all buy and sell estimates in absolute dollar value over the past three years. In absolute terms, this falls below the three-year average absolute dollar value of $26bn worth of equities to be rebalanced.” – Zerohedge
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