The rubber finally meets the road, the Senate could vote on tax reform as early as Thursday. For a moment, lets assume it passes, then the House and Senate would have to hammer out a compromise. As we watch this drama play out, it is likely the best argument for term limits as it has become painfully obvious they support special interests as opposed to the business of the people. How could we possibly be sitting here after Thanksgiving hoping and praying for 50 Republicans to come together and do something for the country? Quite frankly, I’d be shocked if any of the 48 Democrats would support it. At this point I would be similarly shocked if Corker, Flake and McCain vote yes.
But the market has also hoped at every turn this would work out. But they also believed Obamacare would be repealed. So, when you hear people talking about a slope of hope, this is it. The sad thing is we aren’t even in a bear market.
In the past week, we had any number of good vibrational readings that propelled markets higher. One of these was the S&P 50, which hit the 38% retracement in 38 bars, an excellent square out.
Also noteworthy on this chart is they finally hit 60 bars up and only had a tiny reaction. Sellers are not to be found. Yeah, I know it was light volume holiday trade. These markets continue to reveal their hand in big and small ways. The Transports turned up on Nov. 15, on a 61% retracement to the prior leg and as of now hanging on. Housing had a near perfect doji on Wednesday yet was higher on Friday. Dojis are not sell signals, merely warnings. How many warnings are we going to get? We are not going to get into the delusion discussion again but perhaps the folks of Europe are finally starting to wake up.
Its been an interesting season in politics. First Brexit, then Trump and now it appears the sun is setting on Angela Merkel who does not appear to be able to cobble together a functioning coalition after she won another term in September. The European markets might be waking up. The best representation I can give you of Europe and my new retracement work is here on the CAC where they started to put in a secondary high last Friday at a 56% retracement and 155 hours off the top.
Today, they left an upper tail as they did in Germany as well. They should retest the low end of this range. What is going to happen in Germany? Nobody knows right now but it is a blow to the European Union to lose its biggest supporter. Right now, speculation is should Merkel really leave, the mantle of nation-state support would fall to Macron who played the European Union anthem before the French anthem on his election victory.