Norman: Debt Deal Gives Stocks a Green Light

With the House having passed a clean increase in the debt ceiling and barring any problems in the Senate, it looks as if the market will blister higher in the next few months as it continues to unwind a lot of bearish sentiment.

This is typically a strong period for the market as it is tax refund season and we're starting to see those refunds cascade in. Monday's huge $18 billion IRS tax refund brought the total for the month so far to $30 billion. The figure is $2 billion higher than the same time last year. Last February's $106 billion in tax refunds provided the launching pad for a strong 1,300 point rally in the Dow that took place from the February to May period.

While I have been saying that an increase in the debt ceiling was the last obstacle between the market and new highs (and significant new highs, I believe) I don't want to get overly excited because we still are running with quite a large federal spending shortfall relative to last year.

The most recent data now puts us at about $53 billion below last year's total spending figure at this time. That's not as bad as the recent high of $65 billion, but it still says we need to make up plenty of lost ground.

The good news is it that seems quite do-able with the debt ceiling out of the way, so stocks should really be entering a glide path higher from here on in.

Further out, it seems like the year is shaping up to be quite decent and even commodity markets are starting to perk up to confirm that. Gold just hit a three- month high, coffee is surging, cotton is at a four month high and as we get to the rest of my list we round it off with corn, wheat, soybeans, copper, sugar and orange juice all looking like they have put in a bottom.

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