Trump Will Pivot To Tax Reform – Market Will Like It – Buy the Dip
The market has been volatile this week. Investors are searching for the next “driver” and all of the focus is on the healthcare bill. The vote was postponed and it probably won’t happen until the market closes today. Most people believe that if it doesn’t pass the House that Trump’s credibility will suffer and the market will decline. I have a different opinion.
Trump vowed to repeal and replace Obamacare, but he also said that a part of him just wants to see it implode. As soon as Republicans change it, they own it. Nancy Pelosi is already clamoring about this.
Democrats know that Obamacare is doomed and they also know the changes need to be made. They are just as much at fault if it doesn’t get passed. Obamacare is a 2500 page plan and it impacts millions of Americans. Healthcare is an enormous project to try and tackle right out of the gate and Trump regrets putting it ahead of tax reform.
If the bill does not get passed, Trump will blame it on “the swamp”. He won’t waste time on it and he won’t make any more concessions. I would not be surprised if he lets Obamacare fail and he uses it to turn more Senate seats in 2018.
Trump will let the GOP wrangle over healthcare. If DC can’t find a solution and Obamacare implodes, the blame while fall on Democrats. I do believe that Democrats will start to feel the heat and they will need to “come to the table”.
Tax reform is something that every politician can get behind. That will be his next focus and there will not be nearly as much resistance. As far as the market is concerned, tax reform is all that matters. Any market dip related to healthcare will quickly be reversed when tax reform is put on the front burner.
I don’t like to spend this much time on politics, but it’s driving the market.
Flash PMI’s in Europe were strong. Global economic activity is improving and the interest rate hike last week should be absorbed by the market.
Swing traders should stay on the sidelines. If the healthcare bill does not pass the House we could see a market pullback to SPY $230. That would represent a buying opportunity. All the market cares about is tax reform. It doesn’t care about Trump’s credibility. Stocks sold off this week on the notion that tax reform would not be addressed until a healthcare plan is approved. I don’t think that will be the case.
Day traders should expect another volatile day. The market will move based on the “winds” in DC. Use the first hour range as your guide and take profits quickly. I will be favoring the long side.
Support is at $232.50 and resistance is at $235.
Even if the House approves the healthcare bill, it still needs to get through the Senate.
Watch for Trump to pivot away from healthcare in the next few days.
Market commentary provided by OneOption, LLC a firm separate from and not affiliated with Regal Securities L.P. Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.