How Low Can We Go?

While I have been patiently waiting for the markets to regain some momentum to the upside and continue the climb to 1400 on the S&P, I have to at least be cautious that this correction may continue down a bit further in the short-term. The continued weakness of late and failure of buyers to follow-through on the bid has to be acknowledged if you are bullish. And when I say acknowledged, I don't mean feared.

It seems that most people are bearish with the recent weakness and that often times enforces my conviction as a bull. So though I am cautiously aware of the weakness in the charts, I am still confident in my long position. With a poor ADP payrolls number on Wednesday, I feel that the negativity in terms of the employment situation has already been priced into the market. Consensus estimates for this morning's employment report at 8:30am EST have now been lowered, so we will need to see terrible data to instigate another sell-off.

Another major reason for weakness over the past few days is the continued contention in congress over whether or not to raise the debt ceiling. I am in the camp that believes that the debt ceiling will have to be raised. There can be debate, but in the end, the US will need to expand its balance sheet even more. This, of course, will be to keep interest rates low and ultimately will keep the markets from falling too much.

In any case, I am not overly concerned of a major market sell-off yet. I see choppy markets that will eventually give way to higher highs. For this reason I am willing to continue to manage my long position.