I'll get to the Harrisburg, PA bit in a minute, after some preamble. Back on Apr.14 (scroll down), I
suggested the SPX was nearing a flashpoint. The indicators were negative, but the market was
fast approaching a short term oversold. It hit a low point, and bounced a little last week, before
catching fire for the first two trading days this week. Confidence was helped over the weekend
when part one of the French election went as expected, but remember as well that The Donald
announced last week that an outline of the tax cut / reform program was to be announced this week.
He "kited" the market yesterday with the announcement that a large cut in the corporate tax rate
could well be proposed, and the Treas. Sec'y added fuel to the fire by hinting that such a cut would
be financed by borrowing, with the resultant stronger growth to "pay for" the cut. This brings us
to the starry night in Harrisburg. In his first 100 days in office, Trump has produced a thin slice or
two above jack shit. This Saturday he holds a rally in Harrisburg, and hopes to cover very anemic
performance by touting his tax plan and bragging about how well the market has done since the
election. Maybe he will pull it off, maybe not.
As he tries to pull the market into his world, the short term economic indicators continue to suggest
that a flattish market is the best prospect. The rest of the week will be busy in DC. The boys will
need to sign off on keeping the gov. open; there will be more from Trump on tax cuts; and there will
be feedback on the tax plan and the wealth care er, health care plan from the Congress. As well, with
the nuclear submarine USS Michigan docking in South Korea to complement the USS Vinson
battle group now (presumably) in position in the Sea of Japan, it will be young Mr. Kim's chance
to pop off.
Attached is the SPX Daily chart. What is that old rule that price gaps are eventually closed?
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!