We started off slowly, but some midday optimism over a potential debt-ceiling deal kicked in, and that attracted some buying interest. Unfortunately, the trust in our politicians apparently isn't all that high, and worries over the ability to make a deal cropped up again. We sold off all afternoon and closed near the lows of the day. After the pounding we suffered on Wednesday, that isn't exactly the sort of bounce action that we like to see.
The bottom line is that the market continues to be held hostage by the headline news. It is just too risky to load up in hopes that the politicians are going to suddenly find a way to compromise and reach an agreement. In fact, the risk is growing that we'll have some sort of debt downgrade, and even it such an event is anticipated to some degree, it would generate a very nasty reaction from the market, since it would create a huge amount of problems and uncertainty.
I don't expect to see a debt-ceiling deal until the very last minute. We will probably have some progress made this weekend, and then we'll finally see something passed next week, but we have to keep in mind that we are counting on our "leaders" in Washington, and that shouldn't make anyone feel very confident.
