After a rough three-week patch for the S&P 500 SPX, values are back on the bull amid stimulus optimism. As a result, March E-mini S&P 500 futures are trading in the neighborhood of 3900.00 and driving higher. Although we have seen concerted selling of U.S. large caps since mid-February, prices haven’t slipped all that much. Values are still near record highs as Biden’s first COVID-19 stimulus package appears only hours from gaining approval.

So, what’s in the “American Rescue Plan?” Here’s a quick look at the highlights:

• $1400 direct payments to individuals that make under $75,000 per year or couples that make less than $150,000 combined.
• Child tax credits, rent, and food subsidies
• Extension of enhanced unemployment benefits until 6 September 2021
• Billions of dollars allocated for vaccine distribution and school reopenings

Unlike last year’s massive stimulus package, support for this one is divided among party lines. Critics cite the bill as being frivolous, filled with earmarks designated for special interest groups, foreign entities, and non-COVID-19 projects. According to House Republican Devin Nunes, “this [Biden COVID-19 bill] is a slush fund. It has nothing to do with COVID. This bill has very little money in it for COVID.”  

Conversely, Speaker of the House Nancy Pelosi has called the bill a “life saving” piece of legislation. Only time will tell exactly what the impact of the American Rescue Plan will be; however, one thing is for sure ― another tremendous amount of stimulus capital will hit the American economy beginning next week.

Stimulus On The Brink Of Becoming Law, S&P 500 Rallies

At this point, Wall Street must be getting used to government stimulus and rock-bottom interest rates. Nonetheless, values are up significantly as the House of Representatives prepares to sign off on Biden’s COVID-19 relief bill Wednesday morning.

Bottom Line: If we see more stimulus-driven gains, a short trade may set up in the March E-mini S&P 500. Until elected, I’ll have sell orders in the queue from 3949.25. With an initial stop loss at 3954.25, this trade produces 20 ticks on a standard 1:1 risk vs reward ratio.