The swing in market psychology is going to put a few traders on the couch. Do we really need a new scandal to bore you with? I was not in the room with Roy Moore, so I have no idea what he might have done or did not do. But the experts I listen to who are usually right, believe this is a political hit job not by the progressive left, but by the GOP leadership who burned $30 million trying to beat this guy.
The mood in the early part of the week was very thick when the crowd realized this scandal might have an impact on the tax vote. The GOP needs 50 plus Pence to get it through. There are three question marks named McCain, Flake and Corker. By the middle of the week, they added the honorable Senator from Wisconsin named Ron Johnson who said the bill would have to be repaired in order for his support. That makes four in the questionable column. All of which brings us to Roy Moore. It is suddenly feasible that Alabama seat formerly held by Jeff Sessions which has been red for a long time could turn blue.
Forgive me if I listen to too many people, but I could’ve sworn I heard that in the heat of battle they needed to get taxes done before this special election in the middle of December to ensure its passage. By the end of the week, Mnuchin said a final bill could be on Trump’s desk by Christmas.
The other problem presented by the prophet David Stockman is even if such a bill were to make it, it’s mostly hyperbole because it won’t have the kind of effect on the economy the Reagan tax cuts did. I’m not going to use up all my space to spell it out, but one problem is they’ve taken out the deductions for state and local taxes which means the folks in the big states won’t be getting the meaningful reductions hoped for this time a year ago when the rally started.
With that in mind, the mood shifted 180 degrees with the good earnings reports out of Wal-Mart and Cisco. After falling away from the initial gap down the SPX came right back to it on Thursday while tech nation made new highs. Once again, we have a market that came right to the cusp of disaster or at least some real technical damage and bears were overwhelmed by bulls.