Global Macro: Beware of Weak Fundamentals at Market Highs
NEW YORK ( TheStreet) -- The debt deal boosted equity markets Thursday, but a fundamentally weak fourth quarter could dampen the market's parade at record highs.
Earnings season has just begun, and so far technology and financial companies have underperformed expectations. That has been masked by the the debt-ceiling resolution, as a U.S. default would have been catastrophic, compared to a few earnings misses.
Light revenue is a reason the Federal Reserve hasn't reduced its bond purchases just yet. The economy is improving, albeit at a gradual pace.
The potential end to stimulus made investors cautious in the third quarter, weighing on equity markets and consumer spending, and in turn on third-quarter results. The debt-ceiling debacle didn't help. It was a speed bump to record highs.Still, the market is trading at record highs as investors flocked back into equities this week after waiting on the sidelines through much of September and October for a government budget to be passed and for the debt ceiling to be raised. Monetary stimulus should continue through 2014 to make way for Janet Yellen, the nominee for Fed chairwoman, to get settled and to compensate for fiscal policy challenges. With so many hypothetical situations lying in front of markets the next few months, it is prudent to consult technical charts. (SPY). The index is trading at record highs at the upper bounds of an up-sloping wedge pattern. The pattern will act as major resistance for prices pushing higher toward 180 . The catalysts for the up move have been continued stimulus and no debt default, not the kind of solid fundamentals that justify all-time highs. Follow @AndrewSachais This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts