Expect An S&P 500 Decline Monday

I predict an S&P 500 decline on Monday due to the unending Congressional impasse

Stocks, ETF, Daily Market Wrap, SPX, SPX Chart, DIA, SPY, QQQ, IWM, USOI believe the S&P 500 (SPY) will decline on Monday because the United States defaults this Thursday and Congress has yet to stop it. The S&P 500 (SPY) and major equity markets soared last week, with the S&P 500 (SPY) rising .63%, the Dow Jones Industrial Average (DIA) rising .73%, and the NASDAQ 100 (QQQ) rising .83% to finish out a volatile week.

With just three days left until the United States defaults on its debt and with no movement coming out of the House or Senate as of Sunday night, I do not see investors reacting well to the fact that Congress has yet to fix this crisis. Last week we all witnessed the reactions from Wall Street regarding a “no-deal” versus “we might have a deal” mentality, which took the S&P 500 (SPY) down and then up 3% within just three days. Investors seem very scared of this situation, so scared as to buy on a rumor of good news and then sell on just plain bad news. In that respect, have investors really changed?

From a technical perspective, the S&P 500 (SPY) has a rising RSI (56.74) which suggests an uptrend for now, but the MACD is still in negative territory (-1.410), albeit rising in the positive direction. The S&P 500 (SPY) appears to be in very bullish territory after last week, so it will likely take a US default threat to bring it back down. As it just so happens, the bears might just get what they are looking for come Thursday:

Internationally, both European and Asian markets finished in the green last week, but Nikkei futures are currently in the red, despite a stock trading holiday in Tokyo on Monday.

US futures markets are also trading heavily in the red at the time of this writing, also suggesting lower prices tomorrow.

The VIX Index finished overall in the green last week despite a negative Friday in the red. The VIX still appears to be in positive territory despite its wild swings into negative land, suggesting that investors are still spooked silly over this Congress-induced crisis.

Monday would bring us a slew of helpful economic reports, but, alas, the government is still shut down. We are also expecting a slew of new earnings reports, which will likely to be drowned out by the political drama, even if some earnings reports turn out positive.

And, for our fun fact of the day: according to MarketWatch.com, Americans will spend an estimated $2.6 billion on Halloween this year. Of that amount, $330 million of it will be spent on Halloween costumes for pets. Halloween is my favorite holiday, but $330 million on Halloween costumes for pets? Only in America!

Bottom Line: I predict a decline for the S&P 500 (SPY) and major equity markets on Monday, largely due to the fact that Congress has three days left to figure out how to pay its bills. Happy trading!

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