Dow is making a new five down

Political gridlock in the US has been putting pressure on stocks. This weekend is crunch time for Debt Ceiling and Budget deals.  Either one could go one way or the other.  If we see a government shut-down, that would pressure Treasures (I have taken full profits on my long T-Bond trade this week), as it would signal that US government bonds might no be so risk-free after all.

That would really change things!  If US debt gets downgraded yet again, it would set the fixed income world alight.  So far, complacency reigns, but that could change very soon.  That is one reason I took profits on T-Bonds.  The other reason?  It had hit my target at 133.

But stocks are another kettle of fish.  This afternoon, the Dow has made a new low, but has completed a clear five down (a slight modification from my first guess).

Also, it still hasn’t broken down from the Fib 50% retrace with confidence.  But it could make a dash for the 62% level around 15,000 to complete w5.

I still believe a rally is more likely than another plunge down.  I would like to see an upward break of my upper tramline – and a congressional deal could be the spur.

I also like the looming positive momentum divergence on the hourly chart!  That is potentially bullish.