The major stock market indexes all sold off lower this morning after staging a sharp gap higher open. The catalyst for the stock market pop at the open was obviously the passing of a debt ceiling resolution in Washington. Shortly after it looked as if a compromise was made by both parties, statements from leading members of the Congress have said that they are not sure if they will vote for the deal. The stock market only wants to have certainty. Even if the debt ceiling was not increased the stock market would have declined for a few days and then found a low. If there is one thing that the politicians should have learned by now, it is that the markets hate uncertainty. How can someone really invest or trade when they do not know if the rules are going to be changed in the middle of the game? There simply is no certainty in anything that the politicians do.
This afternoon the House of Representatives was scheduled to vote on the debt ceiling compromise at 2:00 pm EST, however, that vote has been postponed until tonight. If traders want to know why the Dow Jones Industrial Average is in a 300 point intra-day range, this is the reason why. It is important to also note that the global markets are also facing uncertainty from politicians and bankers abroad.
Italy has been in the news as the latest country to need a bailout in the European Union. Earlier, yields spiked higher in Italian debt signaling further problems for that country. The same thing occurred in Spanish debt as yields spiked higher in that country, which is again very negative. This is just so much uncertainty surrounding these countries that traders must simply remain nimble in this type of environment.
The United States is supposed to be the leader of the free world. It does not seem like it is a free world anymore, nor does it seem as if the United States is the leader. It really seems that the Chinese are the leaders and we all know they are not free, they are still governed by a communist government. Last night, the Shanghai Index traded flat as a board. The Shanghai Index did not rally on the back of the U.S. Debt ceiling news. That was the first clue that told us this stock market could be weak after the opening bell. Maybe we should trade in these politicians for a news set of talking heads. These people simply cannot make a firm decision. Raise the debt or don't raise the debt, lets just make a decision already.