Merriam-Webster's online dictionary defines uncertainty as, "lack of sureness about someone or something." While an argument can be made that the future is always uncertain by definition, there are currently two key world events that have heightened uncertainty.
The US budget impasse has lasted 25 days long with no end in sight. The Trump administration is hardened in their position regarding wall funding while the Democrats are just as adamant about not providing funds. Recent polls indicate that the core constituencies of both parties demand fealty to each party's respective positions, increasing each's intractability. According to the NY Times, White House economic advisers believe the shutdown will cut economic growth by .13%/week, which means growth is already .5% lower. The inability of a government to solve basic problems increases business uncertainty, which means delayed decisions that will slow economic growth.
Brexit. This has been a slow-motion trainwreck for the better part of the last six months. Yesterday, Parliament voted down Teresa May's plan in one of the biggest defeats in British history. She survived a no-confidence vote earlier today, largely because no one would be foolish enough to want the job. The path ahead is very much anybody's guess (here's a good primer from the Times).
To place this into GDP perspective, the largest, second largest, and 6th largest world economies are experiencing a tremendous amount of uncertainty. And that's before we add the China-US situation into the mix, which brings the third-largest economy to our group.
The OECD has released their latest leading indicators, which show a slower rate of growth:
The Markit PMIs have telegraphed this slowdown for the last 3-6 months.
Let's turn to today's performance table: We've got another good day on our hands, with the higher-risk indexes outperforming the SPY and DIA. Treasuries were off fractionally. Something to consider: We haven't had a lot of wild-swing days. Instead, the market has continued to make modest but steady progress higher on a continuing basis. This is a preferable method of moving higher as it usually gives the market a number of technical levels to use as support in the event of a correction. I know of no analyst who likes end-of-the-day selloffs; they indicate a hesitancy and concern on the part of traders that signals weakness. Today, the end-of-the-day drop is understandable: the no-confidence vote in the UK indicates heightened risk. Regardless of the reason, this is a bearish development. On the five-day chart, we now have two key technical levels - the upper 250s and 260.7. Prices are in a modest move higher with a two-day trend line supporting prices. Up above, I mentioned that one of the side effects of modest advances is they leave technical toe-holds behind. Should the market correct, there are multiple support levels that prices can use for a soft landing. Above there are three areas: The upper 250s, the upper 240s, and the lower 240s, that prices can use for support. That will limit the downside of any selloff. Today, prices advanced beyond the 50-day EMA. But, they printed a small-bodied candle, which is potentially bearish. Also note the declining volume as the rally has advanced, indicating a lack of enthusiasm for the rally.
Ultimately, the market is in a good place. Prices have slowly advanced and are now above the 50-day EMA. Volatility is down. The only concern is volume is weaker than we'd like.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.