In my 30-plus years in the markets, I can safely say that most popular analysis methods do not work well. Still, I can attest that a combination of forward-looking macro analysis combined with a review of earnings projections works most of the time. In plain English: Look for change.
New fundamental and macro developments often leave the technicals of the market in the dust. And the new macro development is an aggressive timeline for tax reform by the Trump administration. This is a change from the prevailing wisdom. To fully understand the impact, let’s start with a chart.
Chart
Please click here to see an annotated chart of Dow Jones Industrial Average YM, futures. It captures after-hours action and represents large, liquid stocks. Popular, broad-based ETFs such as S&P 500 ETF SPY, Nasdaq 100 ETF QQQ, and small-cap ETF IWM, gapped up on the news.
The VUD indicator is the most sensitive measure of the net supply and demand in real time. There is net selling on the news. This indicates there are many non-believers in Trump’s aggressive timeline for tax reform. This is positive because when non-believers are converted later, there is potential fuel for the market to go higher.
Aggressive tax-reform timeline
The prevailing wisdom has been that the White House is bogged down and tax reform might not happen until much later. The news is that the White House has set an aggressive timeline to get tax reform done before the end of the year. The White House is calling for the legislation to be drafted by the end of this month. The White House will push for passage by the House by October and by the Senate by November…Read more at MarketWatch
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