The US deficit plan optimism.

The financial markets are moving ahead of the US budget deficit plan with full enthusiasm and hope but once the plan is being announced,it will become a non-event and the markets will dwindle slowly and painfully digesting the news.
The US lawmakers will definitely have to reach an agreement that will help the nation avoid default and being downgraded to junk by Moody's Investors Services.
Obama embraced a $3.7 trillion debt-cutting plan by a bipartisan group of senators that would combine tax increases and spending cuts, saying it could end a congressional deadlock over raising the U.S. borrowing limit.

The plan is “a very significant step,” Obama said. But there are still resistance from the House Republican.The countdown is now less than two weeks and there's an urgency for lawmakers to intensify efforts for a compromise.This is going to cause a lot of anxiety to the markets.
Time is an essence as the Aug. 2 deadline officials have set for lifting the debt cap.
House Republicans last night passed their debt-reduction plan 234-190 -- legislation that stands little chance of passing the Senate and that Obama has said he would veto if it did. The measure would cut and cap government spending and allow the debt-ceiling to be raised by $2.4 trillion only if Congress approves a balanced budget amendment to the Constitution.
While House Republican leaders indicated a willingness to consider the proposal, they and other members of their fiscally conservative caucus continue to stress opposition to a debt compromise that includes more taxes
The plan also proposes $500 billion in immediate spending cuts including between $85 billion and $202 billion in Medicare and other health spending, $80 billion from defense, $70 billion from education and labor programs and $11 billion from agriculture programs.
Tracking the Dow Tuesday,19/07/11.
Economic news:housing starts,redbook,Thomas Hoenig speaks.
The beginning of July index futures contract.

Asian index futures expiry:8 market days to go.

9:30 am:--Bullish 100.0 points gap up followed by inverted hammer..
Exporters to the U.S. climbed after construction of new homes in the U.S. rose more than forecast in June to the highest level in five months, adding to signs the housing market is stabilizing.
10:30am:--Session high pullback,but holding strongly.
11:30am:--Bearish engulfing to near morning bull pivot support.
12:30noon:--No sign of filling up opening gap,bulls have a fine day.
1:30pm:--Bullish spike up to new session high.
2:30pm:--Ascending bulls,the day's peak being achieved.Graveyard dojis noticeable.
3:30pm:--A usual pullback to the bull pivot support.
4:00pm:--A hammer.
The overall July candlestick is still bullish holding within a body range of 175.0 points which is still at risk.
Tuesday's closing is a mere few points above the month's MAV support line.
Market volatility is still very high in view of the budget deficit Plan A is still not finalized as yet.
Apart from the US,the European budget deficit is yet another hurdle in months to come.
Meantime I suspect the market is under cosmetic short covering.