Stocks Explode - GOP Implodes

Wanted: A New Sheriff

Has the GOP become a rudderless, leaderless ship?  It was just five years ago the party was celebrating its young guns:

• Eric Cantor – the leader
• Paul Ryan – the thinker
• Kevin McCarthy – the strategist

But it didn’t take long before the grassroots felt these guys folded in with the establishment, perhaps lured by power or to gain favor.

Then the unthinkable happened, the leader, Eric Cantor lost his seat in one of the biggest upsets in Congressional history to David Brat, and since then, has been a growing debate over the direction of the party.

I’ve long championed the revolt against the cozy establishment mentality of career politicans.  I think the nation is on the cusp of making this happen but a lot of things can go wrong including setting up the grassroots for failure already embedded in disfunctional government.

Miss Me yet?

Last night I had Rep. Brat on my show Making Money on Fox Business and he could hardly contain his excitement.

Yes, the tide is turning but the so-called Freedom Party must be careful.  John Boehner had become a tyrant with members of his own party, and a pussy cat with the White House, but the job calls for consensus-building.

Yes, Rep Brat is correct about the need for regular order and less spitefulness, but if this issue isn’t resolved soon, some may begin to miss the tyrant they already knew.  The market shrugged off the Washington DC mess but the wheels of Capitol Hill must move, even if slowly.

Back in March 2009, the world was waiting for the next leg down, which was going to come from anywhere at any time, but what was happening was a floor was being put into place for the historic rally to come.  The overwhelming anger bordering on hatred for anyone that said the market was oversold is embarrassing to look back on now, except those fear-mongers still sound as confident as ever.

“This will not end well.”

The assumption that the end is only marked by crashes is what keeps the folks with the worst calls still on soapboxes with megaphones.  The next crash will be the start of a new beginning not an end per se.  On that note, the 1,000 rally off last Friday’s low is being dismissed for any number of reasons, the most of course being the Fed.  The same Fed policies in place for a 2,000 point drubbing on the Dow and oil freefalling from $110 to $40 are now the only thing keeping stocks and oil higher.

I’ve always said good stocks can become overvalued, and bad stocks oversold, but I would still rather hold the former during a correction than try to trade the latter.  Food for thought to long term investors swayed on a daily basis by folks with embedded views that are never wrong even after missing 12,000 Dow points.  Logic would dictate they must pray for an end of any sort because the ride hasn’t been good.  But their soapboxes are sturdy and the market has exhibited more weakness of late than it has in years.

This is the golden moment that cannot pass, the bears and shorts are going to have credence to go with their theory.  On that note, I suspect we could see a big time campaign to derail the bounce but the market has been consistent in one area –momentum.  Forget about bull and bear markets, this has been a shark market always on the move.  Interestingly, the high Beta stocks that would normally lead the market higher after a major reversal or breakout are under big time pressure.

This market is still range-bound but momentum has shifted and that might mean more for all the cash sitting on the sidelines than the same gripes from the same guys that have for the most part been deathly off the mark for years.

Technical View

There isn’t a lot of technical resistance for all the major indices including the Dow, which has broken out, and is gaining moment.  The next two big upside test for the index come at 17,370 then 17,600 while 17,000 needs to become a support point.

DJIA