Fear enters stock markets as another round of declines signal wariness of pro-growth agenda delivery following failure of health-care bill

Last week, Republican lawmakers were unable to successfully rally behind the Trump administration’s new health care bill, and Speaker Paul Ryan pulled the bill from the floor. Investors are looking to this situation as a preview of President Trump’s ability to gather his party and reach across the aisle to pass future legislation. The current conditions do not signal a unified Republican party, and political upheaval may obstruct goals and vision around tax reform, infrastructure spending and deregulation.

Because much of the recent market rallies stemmed from optimism and post-election euphoria around Trump’s promise for a pro-business agenda, any cracks in this facade may harm investor sentiments. Some analysts see overstretched prices in valuations, particularly in sectors boosted by the Trump rally.  In the short-term, we can expect declines in the typical Trump Trade stocks: banking, materials and construction. We can also expect to see losses in the healthcare and biotech sectors. Gold, a perceived safe-haven asset, is on the rise in light of the political setback.

If the DJIA closes lower today, it would amount to a seventh consecutive decline which would be the longest series of declines since August of 2011.

The Dow is currently down 0.24% at 20,548.57. The Nasdaq-100 is up 0.17% at 5,838 and the S&P 500 is currently trading at 2,340.78 which is down 0.14% from the open.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows downward movement building incrementally each trading session. Today’s negative vector figure of -0.14% continues past -1.10% in the next three trading sessions. Today’s support and resistance is 2,331.13 (± 3.42) and 2,356.81 (± 3.46), respectively. The predicted close today is 2,341.30.   

Oil

The ongoing situation in the crude oil market is little changed today, with crude prices for May delivery continuing declines. An OPEC meeting in Kuwait in Sunday proved to be largely inconsequential, as it was revealed that some participating non-OPEC countries do not seem to be achieving full compliance. Compounding this issue is the consistent climbs in U.S production and rig counts. The ramping up of production and supplies continues to work against OPEC’s efforts to rebalance global crude oil markets. West Texas Intermediate for May delivery is currently priced at $47.69 per barrel, down 0.73% from the open.

Looking at USO, a crude oil tracker, our 10-day prediction model shows downward movement building incrementally with each trading session. Vector figures show -0.16% for today, moving past -1.45% within the next three trading sessions. All vector figures are based on today’s market conditions. The fund is currently trading at $10.01, which is down 0.79% from the open. Today’s prediction sees support at $9.87 (± 0.05) and resistance at $10.11 (± 0.06). The predicted close for today is $10.09.  

Gold

The price for April gold is up 0.50% at $1,258 a troy ounce, making gains amidsts uncertainty in equity markets. Prices had spiked to a high of $1,264 in earlier trading. Today’s index slides and shifting investor sentiments around the reality of a Trump pro-growth agenda is causing nervous traders to turn to the non-fiat metal.  

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows a dip followed by positive corrections. Relative to today’s conditions, vectors shift from +0.07% today to -0.51% within two trading sessions. Positive vectors sustain throughout the rest of the prediction window.  The gold proxy is currently trading at $119.4599, up 0.50%. Today’s predicted low is $118.52 (± 0.31) and the predicted high is $119.34 (± 0.31). The predicted close today is $118.60.  

Treasuries

Yields on the 10-year Treasury note dropped 5 basis points today to its lowest level since February 28th at 2.363%. The yield is currently at 2.37%, down 1.96% from the open. The yield on the 30-year bond declined 4 basis points, and the yield on the 2-year bond slid 2.4 basis points. Wavering confidence in the Trump agenda that propelled markets to new heights are causing the sharp dip in yields. Bond prices run inversely to yields, which have been escalating.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see positive signals building incrementally in our 10-day prediction window. Relative to today’s conditions, we see vector figures climbing from +0.38% today to pass +2% in three trading sessions.  The ETF is currently priced at $121.46- up 0.48% from the open. The predicted close today is $121.35 with a low and high of $120.81 (± 0.27) and $121.72 (± 0.27), respectively.  

Volatility

The CBOE Volatility Index (VIX) spiked above the 14 level for the first time this year today- reaching a high of 15.11. The index is currently up 0.93% at 13.08. Relative to today’s conditions, the 10-day prediction window shows strong signals for positive movement. The predicted close today is 13.04 with a positive vector of +1.05%. Today’s predicted lows and highs are 12.62 (± 0.16) and 14.18 (± 0.18), respectively.