For traders, the question of whether the impact of the health care vote actually impacts the likelihood or timing of other economic policy decisions is immaterial; the crucial fact is that the market is trading as if it does. With valuations on all U.S. assets (from stocks to bonds to the dollar) historically high, it may not take much to "pop" the confidence bubble and prompt a short-term correction in all of those assets.
For the first time in over five months, U.S. stock indices suffered losses of one percent or more in a single session. Some said it was the end of the so called “Trumpflation” trade, some blamed crude oil and others cited a combination of these and other factors. Whatever the reason, it was a sizeable move. The signs were all there. Safe haven gold and Japanese yen had been rising since December.
So what about these charts? We have an interesting divergence working. The Nasdaq hit a new high after the Fed while the Dow and S&P 500 did not. The Nasdaq made a new high by 82 cents. But as you can see, the SPX is responding to 620 hours of this move off the November low. This is also the 89-90-day window off that November low and it’s on the front end of the seasonal change point. It’s very possible a change has already started. If the stock market does not correct given these important cycle points clustered with the Investors Intelligence report we are really dealing with a runaway train.