The clock keeps ticking on the debt ceiling situation, but there has yet to be a viable solution proposed by either party. Political leaders continue to jawbone back and forth, but multiple sources are reporting that we’re still not close to solving the major issue looming at the present. Markets have traded back and forth today, but are lower on the session. Stocks are being pulled lower today mainly by small caps, as the Russell 2000 is lagging and lower by about 0.8% for the day. There remain some pockets of strength in the market, bust most sectors are in the red. Today’s relative strength winner is technology, as the Nasdaq is trading near breakeven. Both the Dow and S&P 500 are lower by about 0.3%. Gold and silver are trading near flat, despite their big gap lower on the open.
CHART OF THE DAY
Juniper Networks (JNPR) – The networking concern has underperformed the broad market this year, but that hasn’t stopped market participants from continuing to pile in on the long side. In fact, sentiment in the options market is at a bullish extreme, as there have been over 2 calls bought for every put in the front three months’ option open interest. Additionally, the analyst community is slanted bullishly, as there is only one rating of “sell” and seven “buys.” This creates the potential for future downgrades. JNPR is currently rallying into its 50-day moving average–this trendline creates a nice defined entry for a bearish position.
I like a bearish entry here with a stop on a close above 21. I would initially target a move down to 19, with 16 as a stretch target. NOTE: JNPR is set to report earnings next Tuesday, so be aware of the fact that there could be an outsized move on that report.
WHAT I’M EXPECTING
I still think Washington will solve things (at least temporarily) by midnight Thursday. However, the closer we get to that time, the more pressure we’ll likely see on markets. I’m looking for a drift lower into tomorrow night, and then for some sort of solution to surface, which would likely spark a nice rally.