Where's the Relief?

Clowns to the left of me
Jokers to the right
Here I am
Stuck in the middle with you
--Stealer's Wheel

Domestic stock markets gapped higher this morning on the back of last night's proclaimed debt deal. Before long, however, the major indexes starting leaking. By midday, the +1% gap open had morphed into a -1% loss. By the end of the day, the indexes had cut that loss in about half.

Those positioning for a relief rally once the debt deal was announced are hoping that today's open is not all there is. There remains some doubt that Big Government leaders will be able to marshal enough votes to pass whatever bill actually makes it to paper.

It also may be dawning on market participants that this deal does essentially nothing to solve our spending addiction. Indeed, more debt is the enabler.

Toddo and others think markets are starting to price in a US debt downgrade by the major ratings agencies. As we know, the edge of the sword these ratings agencies are not...

Of course, we also have escalating probs in the EU. Spain and Italy look to be the next bodies floating to the surface...

Until late last week and today, I was firmly in the relief rally camp (as misguided as such a rally might be). Am carrying decent sized trading positions in Microsoft (MSFT) and the metals. The metals continue to act well but MSFT is starting to trade funky. If we do happen to get a debt deal AND a rally, I'll be looking to parse out some inventory relatively quickly--especially MSFT.

Will also be trying to judge the nature of any such strength. Will be alert for clues that suggest that the rally might either be durable...or failing.

position in MSFT, SPX