Index in Focus: S&P 500; Who wants to make a deal regarding the US Debt Ceiling?

If an agreement is reached, will stock markets continue to make all-time highs?




Over the course of the last week. Treasury Secretary Janet Yellen has been making the rounds, letting everyone know that if the Congress does not raise the debt ceiling by October 18th, the US will fail to meet its debt obligations and it could lead to a recession. 

The Democrats, led by Senate leader Chuck Schumer, are eager to raise the debt ceiling as soon as possible, however they want Republican support. Democrats insist that because US debt had doubled under the Trump administration, the Republicans should stand with them to raise the debt ceiling.  The Republicans, led by Senate minority leader Mitch McConnell, want nothing to do with it.  They insist that the main reason the Democrats want to raise the debt ceiling is because it will help them pass the $3.25 trillion infrastructure package the President Joe Biden has presented. 

The Democrats have the power to pass raise the debt ceiling alone via reconciliation, however they refuse to go this avenue as it would force democrats to put a “hard dollar amount” on how much to raise the debt ceiling.  They want Republican’s to be “on the hook” with them in determining the amount to raise it by.

October 6th

S&P 500 has been down as far as 6.1% from its all-time highs on September 6th. Lots of reasons have been given to the selloff in the S&P 500 as have been given for the selloff in other indices (see Nasty NASDAQ here):

  • China slowdown
  • China/US relations
  • Fed Tapering
  • Poor expected earnings in Q3 and outlook
  • Delta Variant
  • Inflation


  • The US debt ceiling

Your S&P 500 trading guide

Today, before the 3rd vote on the increase of the debt ceiling,  Mitch McConnell marched into the Capital to make a deal with the Democrats, which would extend the debt ceiling to December and give the Democrats the time they need to go through the reconciliation process.  Democrats shooed McConnell away, however also suspended today’s vote.

Although traders have said they aren’t too worried about Congress failing to make a deal regarding the debt ceiling (they always do), it appears that some are taking “Just in Case” action, such as JP Morgan Chase. 

The most interesting, and telling, move of the day was in the S&P 500.  The large cap index was down 62 S&P points or nearly 1.5%  As news hit the wires that McConnell was going to offer a plan to raise the debt ceiling, the S&P 500 bounced aggressively. The index closed nearly +0.45%.  This leaves traders to question:

Was the main reason for the stock market selloff due to the possibility that the US Government will default come October 18?  If an agreement is reached, will stock markets continue to make all-time highs?

The timing of the McConnell proposal and the bounce in the S&P 500 was too coincidental.  On a 60-minute timeframe, stocks rallied to test recent highs and trendline resistance at 4368.  Support isn’t until the day’s lows at 4298.8.

spx 60 minute ci

Source: Traingview, Stone X


Trade the S&P 500 now: Login or Open a new account!

Open an account in the UK
Open an account in Australia
Open an account in Singapore


On a daily timeframe, if it appears an agreement will be reached, the S&P 500 could move higher.  The 38.2% Fibonacci retracement from the September 6th highs to the October 1st low is 4378.3.   The 50% retracement is just above at 4411.1 and the 61.8% Fibonacci retracement level and the 50 Day Moving Average crosses at 4443.9.  However, if no agreement is reached and the US does default, support below is at the October 1st lows of 4272.2, followed by horizontal support at 4234.2 and then the 200 Day Moving Average at 4162.3.  In the event of a US default on October 18th, the more anticipated scenario (catastrophic according to Janet Yellen) would probably have the S&P 500 near 3200!

SPX500 daily ci

Source: Traingview, Stone X

The Next 11 Days

Although Mitch McConnell came to the Democrats with a proposal to raise the debt ceiling, which was quickly declined, it shows Republicans are willing to work with Democrats.  The S&P 500 went screaming higher after the wires picked up on the Republican proposal.  Does this mean that if an agreement can be reached on raising the debt ceiling, then the S&P 500 will resume its longer-term trend higher?  Watch this event closely over the next week and a half!

Learn more about index trading opportunities.


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit for the complete Risk Disclosure Statement.