* The S&P 500 and Nasdaq could become oversold in the coming days, but headwinds remain

* Odds of avoiding a government shutdown are improving but it isn't a foregone conclusion just yet

* Should a shutdown occur, eyes will turn to Moody's and whether it downgrades the US's credit rating

* We will remain in a holding pattern with the portfolio in the very near term, keeping our inverse ETFs in play.

After yesterday's move lower in the shares that added to the market's recent selloff, but we could see a step forward for efforts to stop the government from shutting down in the coming days is giving equity futures some lift as we write these comments this morning.

We will see how this develops, but should it come to pass it's likely to be only an interim measure, which means a potential shutdown will be back on the docket before too long. With both the House and Senate pursuing different paths to avoid the shutdown, the odds of the shutdown being averted are rather mixed.

Should a shutdown occur, we will be looking to see how credit rating agency Moody's responds following its recent warning a shutdown could threaten the country's triple-A credit rating. If Moody's were to downgrade the US's credit rating, it would be following a similar move by Fitch Ratings in August that stripped the US of its triple-A rating and triggered a selloff in equity markets.

Despite the cumulative decline in both the S&P 500 and Nasdaq Composite, both have yet to become oversold. What unfolds in the next few days could make that happen. AAP team member and Top Stocks editor Helene Meisler sees the market getting oversold in the short term, potentially happening between today and Friday. Should that come to pass, something we think is rather likely, we are also likely to see the CNN Money Fear & Greed index fall to "Extreme Fear" from its current "Fear" reading as well. This would suggest investor pessimism may be overdone and that we could see the market attempt to recover some of its recent losses.

Once again, the devil will be in the details. If a short-term resolution to keep the federal government open passes, we may see a sigh of relief rally despite kicking the can down the road. The size of that rally will still have to contend with the ongoing UAW strike, potentially stubborn inflation, rising oil prices, and the dollar, which has rallied to its highest point so far this year. That dollar strength could see a renewed focus on companies with primarily US-focused businesses, the likes of which would include Action Alerts PLUS holdings Chipotle (CMG) , United Rentals (URI) , and Vulcan Materials (VMC) , among others.

That same devil will be in upcoming economic data, especially this week's August PCE price index figures and next week's final September PMI and jobs data. We were already going to concentrate on what that data said about inflation progress, wage stickiness, the tone of the economy, and the tightness of the labor market. Comments from Minneapolis Fed President Kashkari (FOMC voter) put what is likely to be an even greater focus on that upcoming data, sharing he thinks another rate hike before year-end would likely be needed if the economy is stronger than expected.

Putting all this together, we will continue to hold our inverse ETFs and remain on the sidelines in the near term waiting to take advantage of oversold positions for some of our holdings. We shared that list yesterday, but for members that missed it here it is - Marvell (MRVL) , McDonald's (MCD) , Universal Display (OLED) , Qualcomm (QCOM) , PepsiCo (PEP) , Amazon (AMZN) and Applied Materials (AMAT) .

While we love Costco's (COST) business, we are warming up to the shares following the post-earnings pullback that looks to occur following last night's quarterly earnings report. We'll have more in-depth comments on that as well as our take on the FTC's antitrust lawsuit against Amazon in stand-alone alerts to you later this morning.