Friday October 11, 2013 08:57
The softness of the market became evident as just the suggestion of a “short” term compromise was floated yesterday by the Republicans. The suggested extension date places the next confrontation, “assuming” they even agree, firmly one week ahead of US Thanksgiving. We suggested an agreement would take 2-5% of the market. The market is currently off 3% from the$1,327 level, where we suggested a heavy tone was evident. The issue on the proposed deal is that we will find ourselves right back here in six weeks, but with an edge for the Republicans. The deal will give the Republicans two months to negotiate their agendas, and if unsuccessful, will gain the upper hand in voter support. I can hear Boehner now – ‘we compromised in October and they didn’t hold up their end. This time, we are firm.’ Notwithstanding my postulations, a short-term deal should still have the effect of further selling, with the $1,257 level possible next week and with any disruptions in the negotiation process today suggesting a $1,297 test.