Bargain hunters, profit taking by the bears, and a little bit of short squeezing of yesterday's late sellers triggered an early morning rally. However, as the day wore on and traders were reminded of the looming debt fiasco, stock index futures faded gains.

I think I speak for all of us when I say, enough already. We'd all like to be able to move on with our lives and our trading...hopefully, a resolution will come along sooner rather than later. Perhaps something will materialize in the next 24 hours but I suspect we will be in the same situation come Monday morning.

A republican sponsored reduction plan will be headed to a Congressional vote this evening and is expected to pass, but at a small margin of victory. However, as we know, passing the house isn't enough and Senate Majority leader Harry Reid has already claimed the Senate will defeat the bill.

Constant reminders of the implications of default are flooding business news stations and pessimism seems to be filling the air. However, we remain cautiously optimistic and looking for moderately better levels to be bullish. In our opinion, it isn't going to take a complete resolution of the U.S. debt to please the markets, just a temporary kick the can down the road bill. Look for support in the S&P from 1291 to 1288ish, below that would could be looking at a quick probe to the mid to low 1270's. That said, we'd rather be a buyer on dips that try to sell a market that has already "been sold" ahead of an event that has a probability of favoring the bulls.

If you are trading the Russell, it is far more extended than the S&P and could be setting up for a dramatic snap back. If you are short this market, we recommend you take extreme caution! Near term support in the Russell is near 788ish.

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Click on image to enlarge!

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