To market watchers, it is fairly clear that the fate of the current stock market trend is tied to today's House vote on the Republican's healthcare bill designed to "repeal and replace" Obamacare. And while the wranglings in D.C. are often quite complex, the bottom line for the stock market here is pretty straightforward.
To be sure, there are never any guarantees in this game and Ms. Market does tend to make a fool of anyone thinking they've got the game figured out. However, logic would appear to dictate here that if the vote on the GOP healthcare plan passes today, traders can go back to focusing on the benefits that tax reform and stimulus spending will bring to the economic outlook - and in turn, the expectation for improving earnings.
As such, one could argue that the worst of the current pullback, which at Tuesday's closing bell stood at -2.2% on the S&P 500, had likely been seen and that a "sigh of relief" rebound would likely be the next step. And depending on the appetite for risk still out there, it wouldn't be surprising to see the major indices step lively back toward the recent highs in relatively short order.
But... If the vote on the bill is delayed, or worse, fails, then we should probably expect to see traders voice their displeasure by pressing the sell button early and often. Thus, the expectation would be for the current "garden variety" pullback to immediately and violently morph into something more meaningful. And while I'm just spitballin' here, a move down toward (or through) the S&P 2275 zone would be a logical response.
One thing I've learned by playing this game for more than 30 years now is that traders like to position themselves at "inflection points" in front ...
