Will tax-reform override political uncertainty this week?

The DJIA and S&P 500 hit all-time highs in earlier trading, following an overnight passage of the much awaited tax-reform bill. This bill was one of the bigger carrots for investors and spurred the initial post-election rallies.  The tech-heavy Nasdaq, however, dropped as major technology companies and internet services saw losses above 1%. FANG stocks had all dropped at least 1% in earlier trading.

This past Friday saw a major event take place in the Russia investigation with a guilty plea from former National Security Advisor Michael Flynn for charges of lying to the FBI.

There are widespread expectations that Flynn will be cooperating with the investigation going forward, which may result in charges against other campaign or administration officials. Ranking member of the Senate Judiciary Committee Dianne Feinstein (D-CA) has indicated the committee is beginning to build a case against President Trump for obstruction of justice. With new developments in these cases, frame each story in terms of its impact on the ability of the administration to continue producing passable agenda items with lawmakers.  

We’re seeing a return of heated geopolitical tension with North Korea- who had just recently tested a new high-altitude ICBM. Rhetoric is getting intense again, and the U.S. is again calling on China to contribute to dialing back the situation. These two issues would normally be impacting market trends, but we will likely see these drop out of focus this week until tax-reform news is fully digested.

At the time of publication, the DJIA is up 0.54%, or 131 points, at 24,360. The S&P 500 is trading at 2,646- up 0.15% from the open. The Nasdaq-100 is down 0.76% at 6,795.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows  strong positive signals. Today’s positive vector figure of +0.53% moves to +1.44% within three trading sessions and rises from there.  Today’s predicted support and resistance is 2,638.81 (± 3.93) and 2,661.92 (± 3.96), respectively. The predicted close today is 2,607.73. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.  

Highlight of a Recent Winning Trade

On November 27, our ActiveInvestor service- which is included in our Tools and Premium membership plans- generated a bullish trade for TJX Companies Inc (TJX). Our ActiveInvestor service is designed for swing trading.

Trade Breakdown

TJX opened on 11/27 within the Entry 1 ($70.87, ± 0.34) price range and moved through its Target of $74.41 on 11/29. The Stop Loss was set at $67.33.

Must-buy Stock for Tuesday

Our must-buy stock for Thursday is E-Trade Financial Corp.  (ETFC). The stock for is projected to continue a steady bullish trajectory, showing all positive signals vector signals in our Stock Forecast Toolbox’s 10-day forecast.

This stock is assigned a Model Grade of B, indicating it ranks in the top 25th percentile for accuracy relative to our entire data universe. Our 10-day prediction model shows vector figures climbing above +2.00% within the next trading session. Our benchmark for vector figures is +1.00%.

The stock is trading at $50.84 at the time of publication, up 3.99% from the open with a +1.44% vector figure.

Tuesday’s prediction shows an open price of $49.03, a low of $48.71 and a high of $50.31.

The predicted close for Tuesday is $50.03. Vector figures show +2.37% for tomorrow, building incrementally throughout the forecast.  This is a good signal for trading opportunities, because the vectors are a primary factor in determining price movements for stocks and ETF.

Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Note: The Vector column calculates the change of the Forecasted Average Price for next trading session relatively to average of actual prices for last trading session. The column shows expected average price movement “Up or Down”, in percent. Trend traders should trade along predicted direction of the Vector. The higher the value of the Vector the higher its momentum.

Crude oil futures are seeing pressure today with new data showing an increase in U.S. active rig counts- creating worries around supply levels. Last week we saw the OPEC meeting in Vienna conclude with an extension of the production cut agreement and compliance data reveals.  As is expected, U.S. domestic producers will likely increase output in order to take advantage of the short-term rally in crude.  One important note from the OPEC meeting: it was announced there would be another meeting in June, which indicates the extension agreed upon has a shorter timeline.  

West Texas Intermediate for January delivery is priced at $57.44 per barrel at the time of publication, down 1.58% from the open.  

Looking at USO, a crude oil tracker, our 10-day prediction model shows mixed signals. The fund is trading at $11.48 at the time of publication, down 1.59% from the open. Today’s prediction sees support at $11.55 (± 0.05) and resistance at $11.88 (± 0.05). The predicted close for today is $11.69. Vector figures show +0.22% today, moving to -0.05% in three trading sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.   

Gold

The price for February gold is down 0.33% at $1,278.10 a troy ounce at the time of publication. The passing of a long-anticipated tax-reform bill is firming up the U.S. dollar, putting pressure on the dollar-denominated metal.  Gold prices and the U.S. dollar tend to move inversely to one another, as a stronger dollar makes gold less attractive to investors holding foreign currencies.

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows consistent negative signals. The gold proxy is trading at $121.08, down 0.42% at the time of publication. Today’s predicted low is $120.33 (± 0.20) and the predicted high is $121.93 (± 0.20). The predicted close today is $121.25. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.   

Treasuries

Yields are rising across the board today following weekend news of a passed Senate tax-reform bill. This will increase investor sentiments around inflation and overall growth. Another contributing factor is the deficit-widening effect this bill will have. A bigger deficit will require the Treasury Department to increase debt auctions- devaluing government bond prices. The yield on the 10-year Treasury note is at 2.38% at the time of publication. Bond prices tend to move inversely to yields.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see steady negative signals in our 10-day prediction window. Today’s vector of +0.08% moves to -0.68% in four trading sessions. The ETF is priced at $126.59 at the time of publication. The predicted close today is $126.22 with a low and high of $125.31 (± 0.23) and $126.71 (± 0.23), respectively.  Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Volatility

The CBOE Volatility Index (VIX) is down 4.11% to 10.96 at the time of publication, and our 10-day prediction window shows continued downward movement.  The predicted close today is 11.65 with a negative vector of -2.35%, which moves to -0.46% within three trading sessions. Today’s predicted lows and highs are 10.75 (± 0.26) and 12.79 (± 0.30), respectively. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.