Despite showing our political dirty laundry to the world, the weekend's tentative agreement on the debt ceiling was democracy at its best: a vigorous debate about the size and scope of government was had. It might have cost us a little in the eyes of the world (I certainly got an earful while in Turkey), but the Europeans and the Japanese are in no position to lecture us excessively about fiscal excess.
Regardless: traders need to stay disciplined. Basic materials and autos are strong this morning. The smart money started buying Friday and will likely take some profits this afternoon. Why? First, the deal, at $2.4 trillion, is well below what was needed to remove the overhang. Second, economic activity has generally been poor...ISI, which conducts very respected surveys of economic activity, has seen surveys on retail, trucking, and China sales all poor in July.
The key to trading today is July ISM, which comes at 10am ET. With the exception of May, it has been above 55 for a year. Unfortunately, the whisper numbers are fairly weak...with some estimates as lows as 52. Still expanding, but not very vigorously.
Others have told me they are planning to sit tight and see how the market reacts...a small group believe the pain trade is higher...not a straight line, but still up...the key technical level is the 200-day moving average for the S&P 500, at about 1283, about 10 points below where it closed Friday.
One other point: there's still some risk on this vote, particularly in the House. Remember the day they voted down TARP? We dropped hundreds of points.
Precious metal stocks like First Majestic Silver are trading down.
1) Hospital and nursing care providers are down this morning...Medicare said it will cut payment rates to skilled nursing facilities by 11.1 percent next fiscal year. Trading lower: Kindred Healthcare (KND), Skilled Healthcare Group (SKH), Sunrise Senior Living (SRZ); even healthcare REITs like HCP (HCP) and Omega Healthcare (OHI) are trading down.