The Debate in Congress Concerning the Debt Ceiling is Not Helping the Stock Market

Tom Gentile

Posted in
Big Picture

By: Tom Gentile
May 15th, 2023

3 mins read

One Thing the Stock Market Doesn’t Like is Uncertainty.

Financial news networks and websites have shown commentary from Treasury Secretary Janet Yellen stating she believes things can get catastrophic for the economy if congress does not raise the debt ceiling.

She is also said to have pointed out that the US government could run out of money by June 1.

There are news articles on the web from a year back to 2021 where she has had to say the same thing about the catastrophic hit the US economy could take if congress doesn’t extend the deadline for paying back some or all of it debt or in the case this year, raise the debt ceiling.

In either case back then or right now it takes both sides of the aisle, Democrats and Republicans to agree.

In all of these instances no matter what year, it wasn’t or isn’t now, an easy thing to accomplish.

You got both sides saying the other is being unreasonable, the things each side is asking for is far apart from an agreement as one side says the other is asking for spending cuts as part of the deal.

Figure 1: 90-day Candle Chart on SPY
Figure 1: 90-day Candle Chart on SPY

The reason we are showing a 90-day versus times where we show 100- or 120- day charts is we are just trying to zoom in to the chart a bit to make the area on the chart we feel needs to be emphasized show up a bit clearer.

Too Many Doji Days Make the Doji Signal Obsolete

The annotation word square in Figure 1 references narrow range days.  When these narrow range days open and close at basically the same price that is what is often time referred to as a Doji, or Doji day.

The Japanese Candlestick called a Doji is looked at often as a reversal signal for the current trend the security is in.

The way we see it is if the Doji is part of a two- or three-day pattern it becomes more relevant as it is part of that longer period pattern (and will often have a different name attached to the multiple day pattern like a Harami or Engulfing Pattern).

The key thing we want to point out here is when you get multiple Doji’s in succession or in this case 4 of the past 6 trading days, the Doji becomes less impactful, and we wouldn’t expect a reversal off the multiple Doji’s.

You can see we have support and resistance lines drawn in on the chart for Figure 1.  A break above or below those are more significant and when that happens we will see what Japanese Candle Pattern, if any, has formed to give us more conviction for the price action break.

The Markets Seem to be Waiting on Congress

Technicals aside, it seems no one wants to put their money to work in either direction to any large amount or degree until congress can come to an agreement on what to do regarding the debt ceiling and if congress can pay their bills.

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