Broad market sell-offs and a spiked VIX amidst mounting allegations against the Trump administration

The Trump White House has been rocked by building controversy around the FBI investigation into former National Security Advisor Michael Flynn, and an apparent attempt by President Trump to derail that investigation. Fresh reports, citing an old memo from closed-door discussions, indicate that former FBI director James Comey was asked to halt his investigation in the Trump-Russia connection prior to being fired. This news, along with the high-profile intelligence slip up with senior Russian officials has raised uncertainty amongst investors. When the administration is embroiled in scandal, Republican lawmakers are not able to effectively work on passing pro-growth legislation which is needed to solidify the post-election market rallies.

The Trump rally may be at its tipping point, and the prospects of deregulation, tax cuts, and a massive infrastructure bill are being questioned. The DJIA is getting close to seeing its most severe daily drop in 8 months. The sell-offs are occurring in sectors that would be positively affected by a pro-growth agenda, and are now being viewed as risky. In typical fashion, investors are moving to safe-havens such as Treasurys and gold. Although index slides were broad and significant, the markets are not in a panic mode.

The DJIA is currently down 1.31%, or 275.06 points, at 20,704. The Nasdaq-100 is down 1.79% at 6,059 and the S&P 500 is currently trading at 2,370 which is down 1.27% from the open.

Using the SPDR S&P 500 ETF (SPY) to analyze the S&P 500, our 10-day prediction window shows positive movement followed by late negative correction. Today’s negative vector figure of +0.13% moves to +0.21% in the next five sessions before turning down. Today’s support and resistance is 239.88 (± 0.72) and 241.75 (± 0.72), respectively. The predicted close today is 240.58.   

Oil

Crude oil prices are gaining after a report from the U.S Energy Information Administration today that showed a sixth week of consecutive declines in domestic crude inventories. The data showed supplies fell by 1.8 million barrels last week. West Texas Intermediate for June delivery is currently priced at $49.25 per barrel, up 1.01% from the open.

Looking at USO, a crude oil tracker, our 10-day prediction model shows overall negative movement. The fund is currently trading at $10.22, which is up 1.04% from the open. Today’s prediction sees support at $10.01 (± 0.06) and resistance at $10.17 (± 0.06). The predicted close for today is $10.05. Vector figures show -0.82% for today, moving to -1.92% within three sessions. All vector figures are based on today’s market conditions.  

Gold

The price for June gold is currently up 1.67% at $1,256.60 a troy ounce. Investor anxiety is not being dampened by sobering rhetoric coming from both Democrats and Republicans- with the possibility of impeachment being brought up on both sides.  Constant controversy and a scrambling administration is putting a dent in investor sentiments around the feasibility of passing pro-business legislation with bipartisan support. Additionally, a weakened U.S dollar- the currency in which gold is priced in-  has made the precious metal more 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 downward movement followed by late positive corrections. The gold proxy is currently trading at $119.81, up 1.84% from the open. Today’s predicted low is $116.83 (± 0.24) and the predicted high is $117.91 (± 0.24). The predicted close today is $117.41.  

Treasuries

Treasury yields are dropping today as investors move into bonds as a safe haven measure amidsts rising political turmoil in Washington. Although some analysts suggest the controversy may not impact the timeline for tax reform bills and infrastructure spending, the odds of an impending impeachment are rising. The yield on the 10-year Treasury note is currently down 4.28% at 2.23%. Bond prices and yields are inversely related to one another.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see mixed signals on volatility in our 10-day prediction window. Relative to current conditions, we see vector figures moving from -0.10% today to +0.28% tomorrow, followed by a negative turn.  The ETF is currently priced at $123.34- up 1.51% from the open. The predicted close today is $121.08 with a low and high of $120.58 (± 0.27) and $121.95 (± 0.28), respectively.  

Volatility

Using the Barclays Bank iPath S&P 500 VIX Short Term Futures (VXX) to analyze the The CBOE Volatility Index (VIX), we see consistent upward movement. The Fear Index proxy is currently up 13.23% from the open at 15.399. The predicted close today is 14.05 with a positive vector of +2.09%. Today’s predicted lows and highs are 13.60 (± 0.17) and 14.44 (± 0.18), respectively.