Wednesday, October 16, 2013

Will John Boehner blink?

Well, it will be a little more than blinking ...

With every passing minute the possibility of credit default is falling squarely on the shoulders of House majority leader John Boehner.

It's pretty clear at this point that the Senate will come to an agreement on an acceptable plan that will open the government and avert default.  Once the bill moves to the House, Boehner has the biggest decision of his political career to make:  will he destroy his political career and bypass the Hastert Rule  discussed here or will he sink the US ship and threaten US creditworthiness.  He has consistently stated that a US debt default is not an option.   My bet is he will do the former.

Meanwhile, a spate of earnings reports are coming in decidedly positive.  The S&P is bumping up against resistance and a case could be made that the daily chart is forming a right shoulder of a head and shoulders formation which is a bearish formation:

 (click on chart for larger image)

The S&P reached a high of 1709.67 on August 2nd (left white arrow) and as of the time of this writing (9:48 AM EST) is bumping up against that resistance.  My feeling is that this potential pattern will be negated and  stocks will rally into the news should Boehner do the right thing and we will see new all time highs shortly ...