Republicans move the fight

The S&P looks set to drop 0.7% on the open as the futures markets fall during Asian trade.

- Futures slide on the open and continue to fall

- Republicans take the fight to the debt ceiling

- Earnings season approaches

The DOW futures are following suit as the Republicans look to reset after losing the Continuous Resolution fight to focus on getting something out of the debt ceiling debate.

The comments out of John Boehner’s office are concerning. So far the markets have been able to distance themselves from the debate on Capitol Hill. However, if the debate for tax breaks and the other concessions start to be coupled with the debt limit the market will react violently.

The shift in debate will cause indices movements and the European open looks set to be affected by the comments from the weekend with all five majors points lower.

With US earnings season kicking off this Thursday expectations are for sale growth, margins and earnings per share to have picked up after Q2, as the forecasted 3% GDP figure start to eventuate. If the ceiling isn’t lifted, the expected support from Q3 earnings will evaporate quickly.

We are watching the August low very closely (which is the 62% retracement of the June low to the all-time high) and if this is broken on the back of fear, the June low will be next.

Fibonacci retracement of the S&P June low to the all-time highFibonacci retracement of the S&P June low to the all-time high

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