Senate Majority Leader Harry Reid has indicated that the U.S. Senate will vote on a spending package today intended to stimulate the U.S. economy and which also rewards special interests. If the bill is passed "as is", it will likely be one passed largely on party line votes. Stocks are responding with a solid rally! The Dow had been down more than 100 points, but are now 100 points higher as a result.However, two influential floor traders have suggested that stock index futures are rising in anticipation of the bill's passage, but that once it does, the "buy the rumor, sell the fact" phenomenon will eventually occur. In other words, once the bill passes, another sell-off is likely. I don't know how immediate this will be, but in the past when other bailout bills passed Congress, it occurred fairly soon thereafter. I am hoping for at least a temporary rally of a few days or even weeks, but I will be wary of this possibility.
The bill, if passed "as is", it not likely to provide sufficient stimulus or correct the imbalances that exist in the economy right now. No credible business person nor economist that I know of genuinely believes this will work. However, I would still follow any momentum higher as long as it lasts. Eventually, however, this bill, as it exists at this time, will not correct the problems in the U.S. economy, will significantly multiply the national debt, and will falter. It is mostly just more pork barrel spending! The higher stock markets rise in the meantime, the further they will have to plunge when the next drop occurs. Larger drops later mean greater profits when we short the market. The bear market has much further to go!
