Major averages rose on lower volume. While the S&P 500 closed above its 50-day moving average, the low volume could be cause for concern, especially since the government remains closed. While history shows such periods are often met with bullish market action, and the debt ceiling issue will most likely be resolved once again, fear can take the market down in a hurry over a period of a couple of days before support steps in. Should such market action occur, it could be a buying opportunity. Nevertheless, keep stops tight in this uncertain environment.
With the budget spat taking another turn over the weekend and no end to the current stalemate in sight, futures are trading down almost 1% as of this writing. That said, the CEO of debt-rating agency Moody's says the U.S. will not default, and strategists, including one analyst at Deutsche Bank, said it is less likely the Fed will have enough data to be confident to taper in the coming months, so ultimately it may be best to not fight the Fed, the ECB, or the Bank of Japan.
Buyable set-ups have diminished recently as most leaders remain extended, and the danger of trying to short the market in such an environment is that a sudden announcement of a settlement to the budget stalemate could spark a sharp upside reaction rally. This highlights the difficulties of operating in such a highly news-oriented environment as the market spins back and forth. Investors should expect volatility as the current situation winds on.