Ian Woodward's Investing Blog

Wall Street Reacts to a Day in the Life of Congress!

Today’s discussion by the Three Musketeers, Secy. Paulson, Fed Chairman Bernanke and SEC Secy. Cox at Capitol Hill was a battle between Wall Street vs Main Street.  It goes without saying that the senators questioning and of course posturing was to make sure that the Tax-Payers’ concerns were being heard, since we will ultimately be footing the bill.  However it was abundantly clear to me that what was originally expected to be a quick passage of the $700 Billion Bill was not likely and as you will see so did Wall Street by the end of the day.  The DOW and Nasdaq closed down another whopping 162 and 26 points, respectively, and so we drift along teetering on the brink of disaster.  Net-net, while Rome burns, Congressmen Fiddle!

wall

I captured the highlights of the action on a timeline relating to the ebb and flow of the DOW during the course of the hearings, and here are the various snippets from the Administration, Congress and the CNBC commentators in the first two hours in the morning:

street 1

…And here are the next 2&1/2 hours:

street 2

Here is a picture of the internals of the market which showed how these indicators reacted during the five hours I kept an eye on this.

internals

The only saving grace is that volume was low which signaled a wait and see attitude by Wall Street.

I submit that another day or two of this pussy-footing will see us on the road to the floodgates all opening to the downside as I forecasted yesterday.  Hang on to your hats for a bumpy ride.

Best Regards, Ian.

Editor’s Note!  Please read important discussion in the Comments section of this note to understand the context in which it was written.

 

3 Responses to “Wall Street Reacts to a Day in the Life of Congress!”

  1. Hal P. Says:

    LOL That was very interesting. It’s amazing to me really that the market is so emotional. But it is what it is.

  2. Stock Research Says:

    Ian, I don’t disagree with your assessment that things will get worse before they get better, but I think that, all things considered, it is good that the market has not over-reacted to the ongoing bad news and uncertainty. I think most of us agree that a measure of debate is good, rather than writing a $700B check with no questions asked.

  3. ian Says:

    Hi Steve: I couldn’t agree with you more. I suppose what triggered your comment is my last sentence on “pussy-footing” as my concern at the time was for an over-reaction by the markets ala 1929 and 1987, which fortunately for us all has not occurred so far. I certainly didn’t mean to imply that they write a blank check, and I am glad to see the subsequent urgency on all fronts to bring closure to a joint solution. I also agree a measure of debate is healthy, and as things have since unfolded there has been sufficient due diligence to buoy the market up from precipitous consequences. If “floodgate” action is avoided we will all be happy until the next time. My emphasis was on the “degree of a sense of urgency”, nothing else.

    I have made it a principle of mine not to bring politics into the discussion on this blog, but as I have always maintained, one important aspect of Investing is to understand the reaction of the Stock Market to the action or inaction that the FOMC takes. If you take the time to look at past blog notes of mine, you will see that is the emphasis I apply. That is why I take the time on occasions like this to share five hours of my efforts just catching that reaction, leave alone the additional time to write the blog.

    My question of you and the audience is “Was this particular blog note of value to understanding the reaction of the market to important FOMC, Administration and Congressional discussions in helping you be a better student of Investing?”

    Best regards, Ian.

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