This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Caution: A Convergence of Contrarian Indicators

Stocks in this article: XLFAAPLWFCDIASPYQQQDOGSHPSQ

The WFC earnings report, along with the Reuters report that Apple (AAPL) has almost halved its order with suppliers due to weak demand, will probably mean an ugly Monday. Look for across-the-board weakness in financials, via SPDR Financial Sector ETF (XLF) for example, or the general market, via SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 Index ETF (SPY), PowerShares QQQ Trust, Series 1 ETF (QQQ), or the inverse equivalents ProShares Short Dow 30 ETF (DOG), ProShares Short S&P 500 ETF (SH) and ProShares Short QQQ ETF (PSQ).

Caution: Inverse ETFs may result in significant mismatch over longer time horizon. Detailed study and close monitoring are recommended.

While the week will be dominated by earnings and a sleuth of scheduled Fed speeches, one longer-term fundamental may very well make the cautious picture painted above materialize: debt ceiling. Last week I wrote that the risk on debt ceiling is very high. Since then I've come to realize, much to my astonishment, that most people talk about the debt ceiling risk in the sense of it being broken!

No, as I argued last week, there's no chance of that. The risk, rather, is that debt ceiling is raised without any meaningful spending cuts, thus getting a ratings downgrade, or at least the very clear threat of it. Unlike the last downgrade, when global worries counteracted the action and made a joke of the raters, this time it's very likely to stand out like a sore thumb that it is.

But that is two months away. As we get much closer to it we will see how the market decides to pay attention to it. Mark your calendar, though.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,614.81 +215.14 1.31%
S&P 500 1,941.28 +37.27 1.96%
NASDAQ 4,419.4780 +103.4040 2.40%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs