Tax Reform Stalls, U.S. Indices Open In The Red
Shain Vernier • 2 min read
Leave it to the government to mess up a good thing. Yesterday morning the Trump tax plan looked to be fast-tracked for passage by the Senate. Today, it is a whole new ballgame. In a Thursday night debate, concerns over deficit spending came to the forefront and stalled the bill. Now it is anybody’s guess when the final vote will take place.
Another case of government playing games with the market.
The U.S. indices have taken the news in stride, with the DJIA and S&P 500 opening down moderately. As I talked about yesterday, the timing and final result of the Senate’s vote is likely to bring serious heat to the U.S. indices. For now, investors are in a holding pattern awaiting the decision.
S&P 500 Technicals
Below is a weekly chart of the S&P 500. There really isn’t a whole lot to see here, but the bull run over the last year is stunning.
S&P 500, Weekly Chart
Perhaps the most striking observation the chart gives us is the ratio of green candles to red ones. It is a simple point, but longs have been better than shorts! If one went long on Monday’s open and exited on Friday’s close each week all year long, only 14 out of 48 weeks posted a loss.
The billion dollar question is whether or not a failure of Trump tax reform will send the S&P’s into a correction. It is anyone’s guess, but some sort of pullback is certain to occur.
So, my advice is the same as yesterday. If you are active in the U.S. indices, stay protected! News cycles of this nature are capable of sending markets into anarchy. Be sure to have your stops down and leverage in check!