Gridlock in Washington and the Impact on Equity Markets

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Gridlock in Washington (with the utter failure to pass any kind of new healthcare reform) is the theme, so far, in 2017…with Republicans unable to agree to support their party’s latest bill, which is now completely dead, and Democrats simply obstructing everything in sight.

It looks like everyone is tired and unable to do what they were elected to do.

If everyone’s tired, how will this failure affect the progress of any other political items that President Trump has on his agenda?

And how will this affect equity markets for the remainder of the year? The SPX has looked pretty tired since March.

It’s anyone’s guess, I’d say…

Notwithstanding what I wrote on July 16th which describes new “BUY” signals in the SPX and the World Market Index, the last chart posted in that article (see Monthly chart of SPX below) shows that price is currently up against major resistance, formed by a long-term Fibonacci fanline (40%) and dating back to 1990, and is approaching an external Fibonacci retracement level of 200% at 2485 (taken from the highs of 2007 to the lows of 2009).

So, in the shorter term, we could see a “bull trap” occur prior to a decline in equity markets.

Combine this with today’s announced failure of healthcare reform and the Fed’s gradual removal of the low-rate punch bowl, and you can take your pick as to short-term market direction — up, down, or sideways — mixed signals in equity markets.

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