Rally possible next week, not necessarily tomorrow

Slim Pickens riding the bomb in Dr. Strangelove

 Yeeee hah!

As I read the latest shenanigans emanating from Washington regarding the debt ceiling, I am reminded of nothing so much as Slim Pickens riding his atomic bomb to oblivion in Dr. Strangelove.

This headlong rush to national suicide by what embarrassingly passes for our government these days is nothing short of appalling. And if the reports are to be believed, we now have the spectacle of Emperor Nerobama, the Empty Suit, walking out on negotiations today, late no doubt for his daily fiddle lesson. Note to all involved, both the Demicans and the Republicrats: grow up.

I am fed up with this and just about at the point where I simply want to sit entirely in cash until Doomsday on August 2nd. There is no way to make money in this sort of toxic, psychotic market environment.

That said, last night I was weakly bullish on today. It was looking pretty good for a while there, but the day ended up being a carbon copy of yesterday, with early gains evaporating, ending with a 54 point loss for the Dow. If there's anything positive about this, it's that it brought us closed to oversold than yesterday, with the short stochastic in particular very close to bottoming.

The VIX meanwhile is close to its recent upper range, though its upper Bollinger band at 22.93 is still over 2 points away. It's starting to look oversold, but there's no reversal pattern in the candles just yet.

And the dollar put in a doji suggesting the possibility that it might go higher tomorrow, which would be bearish for stocks.

On the other hand,  the pace of the decline in ES has been decelerating over the past three days and appears to be stopping right at the 50% Fibonacci retracement from the June bottom to the early July top.  This suggests a technical bottoming process in progress.

Finally, I note with great interest that J-Trader's buy/sell model has now given a "strong buy signal". His time frame appears to be on the order of a few days to two weeks. I'm a little surprised, but I'm not going to argue with that, given his trading record since I've been following it.

It does look like we're nearly oversold levels from which a rally is certainly possible, but I don't see the reversal on my charts for tomorrow. Maybe on Monday. But with the current insanity in the market, I guess anything's possible. As I said before, I'm getting ready to head for the exits if the clowns in Washington can't start acting like grown ups real soon.  It's just shameful.