Kevin Cook here again, minding the store for Steve.
Well that was relatively painless now, wasn't it? The S&P 500 cut through the 50-day moving average and support at 1,200 like a politician spending your taxes. We should expect some small "digestion" trading around 1,190 but I think the market is on the ropes enough, given the politics of debt in Frankfurt and now Washington, that we will keep plumbing lower toward 1,150.
I'm not much of a political analyst, but I think the elections of 2012 have just been given a whole new platform for debate: defense vs. taxes, with a bit of self-righteous "budget deficits matter" vs. "you gambled with the US credit rating" thrown in. The battle lines in campaign ads will separate those who would risk America's freedom by cutting the military budget from those who want to keep tax cuts for the rich.
The rhetoric will be so charged and ideological, we will barely notice all the back room scheming for the next year to defuse the automatic spending cuts time bomb. Such is politics. Hopefully, the good stuff we can bank on, like growth in the economy and earnings, will be strong enough to weather the storms. S&P 1,100? I'd love to buy stocks there again.
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