Do Markets Care About Government Shutdowns? Should They?
More questions than answers as we head into the big deadline.
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The Market
I am typically the last person to ask what the market will do or has done during a government shutdown. But there is one narrative I have heard non-stop today: markets don’t care about government shutdowns.
Perhaps they don’t. I read somewhere that the two times we’ve had a full government shutdown (as opposed to a partial one) were 1995 and 2013. I don’t know what the reaction was leading up to it or during it, but I do know that both years were the type that had a relentless rise in the market.
But my ears always perk up when I see everyone so convinced that something will or won’t occur. But my favorite line I heard today was from someone who, back in July, said seasonality wasn’t good, so we should pull back, that seasonality in the fourth quarter is bullish.
How can you say that with a straight face when seasonality didn’t matter in the third quarter? In any event, we have folks convinced the shutdown, should it come to pass, won’t matter and the fourth quarter will be up. Both may be true, but my takeaway is folks were prepared for September seasonality, but they have given up on it.
And the indicators? Haven’t changed at all.
And all those stocks that were on the verge of breaking down all seem to be getting saved. Amazon, Microsoft, Visa, Disney, and even the restaurants have finally stopped going down. To me, that remains the market we have, one that rotates constantly.
I continue to think the Transports are going to try and cross that downtrend line.
New Ideas
I was asked if, now that NVIDIA (NVDA) bounced off that 170 area I highlighted a few weeks ago, do I think it can/will breakout. I am willing to give it a try as long as it doesn’t break under that short-term uptrend line. It currently comes in around 172-ish.
Today’s Indicator
The 30-day moving average of the advance/decline line isn’t overbought, and it isn’t oversold. A decline in the market in the next few weeks would lead it to an oversold condition because it is already so close to the zero line.
Q&A/Reader’s Feedback
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Folks seem quite intent on getting exposure to Cybersecurity, as I was asked to look at HACK, an ETF to be long this group. Typically, I would say sure, why not, it ought to get up and over that resistance line, but in this particular case, I think I would wait for the line to be crossed (88), and if you want to get in now, just use a stop under 85.
Qualcomm (QCOM) did end up stopping right at resistance last week (175). I think it holds that 160 support area on this trip down and rallies again. But if it can’t get over 175 on the next trip up, I would fret that it’s like last October or February (see both of those double tops?).
The only reason I can think of Sweetgreen (SG) rallying is that it bounces off that line and is oversold enough as we enter the fourth quarter. Otherwise, I see no pattern that says buy me. Also this is a candidate for tax loss selling.
Chipotle Mexican Grill (CMG) is trying to bounce off that measured target at 40 but that’s the best I see for now. A rally to 42-44 would probably be what stops it the first time up.
