The State of the Trend
My fear that something positive may come out of Washington and change the natural ebb and flow of the market was grossly exaggerated. If anything, Congress' reaction to the financial crisis in 2008 taught us that one should expect the worst reaction at the worst time. What are the odds that things will be different this time?
The normal retracement usually associated with overly bullish sentiment did follow right on schedule and, according to the same study updated from last week, is fast approaching the opposite extreme.
Political games aside, the weekly and monthly trend remain up although dangerously close to breakdown levels.
The last chart, I believe, reveals the true nature of US financial markets during the last decade and a half: a continuous series of artificial bubble and bust cycles. While the debate over who and what's to blame for that may rage for awhile, the more important thing right now is to avoid getting caught on the wrong side of the next move. Keeping an eye on the support lines above will help immensely with that task.