Market Update

S&P futures are falling due to no deal in Washington. This political theater is not new to traders, yet they want to protect their gains and stay risk-avert at the moment. Will there be a deal? I am tired of trying to answer the question. Bipolar personality of this market is granting us a chance of a lifetime. Use it to your advantage, deal or no deal.

$ES_F is trying to keep it together. Gapped down on open and seems to stabilize here in 1330 area. I mentioned this support and 1327 (weekly pivot) as well. In the moment of fear nobody pays attention to fundamentals or technicals, but traders, who have no emotion and are able to trade in these volatile times, will get rewarded for staying patient and composed. Stay short until you see a deal. No need to worry, our politicians will never cease to amaze us. Give them another 200 $SPX points to think. If $SPX cash breaks 1327 we are going to see a major sell-off. My new $SPX levels on the downside will be the targets http://viewonmarkets.blogspot.com/2011/07/spx-new-levels-on-downside.html

Gold $GC_F is in heaven again. I was wrong to think that it will be weak in a short term. Hard to trade erratic consolidations, but staying long or flat until the deal is reached is prudent. No resistance to speak of, supports aplenty. Just hard to short precious here.

Oil $CL_F is selling off in sympathy with SPX futures. 100% correlation continues. Not much to say about it other than to stay short while no deal. If SPX decides to dive some more, oil will follow without any hesitation. $95 is going to be the target.

Conclusion: markets are hostage to deal negotiations. Washington rules the day. Can they screw up the trade? They created it and they will end it, I am sure. Be ready to cover fast and go long if the deal is broad and addresses the debt situation. If the deal is a mere debt ceiling extension - rating agencies and markets will not like it, but even after that, stabilization will come. Simply put, do not expect the end of the world, scale out your shorts wisely and take what market is giving you.
Meanwhile, we thank the trading gods for this opportunity to make some money.