Elliott Wave Options: Debt Ceiling Rally Means Nothing Yet
The market has been largely rangebound for the past few weeks. Investors have faced the potential of a U.S. government debt default. That’s led to caution.
However, markets broke higher last week, and headlines suggested that an upcoming deal kept markets from falling. That move higher has been impacted as some members of the Federal Reserve have stated that they may not be done raising interest rates. So what can investors expect from these contradictory signals?
Last week’s market pop higher, which continued into Monday, could be the final wave of an Elliott Wave.
In the five-wave pattern, the break higher tends to be bullish. But the overall small move throughout the current wave and contradictory signals have kept the move muted.
This move suggests that markets are waiting for a full resolution on the debt ceiling before they head higher. That’s why bad news isn’t sending stocks down too far. And it’s also why good news tends to prove short-lived.
Meanwhile, the banking sector is tightening credit on its own. So despite some comments to the contrary, it’s possible that the Fed is truly done raising interest rates. That could be good for the stock market going forward, as the economy adjusts to the current levels.