Tomasz Wisniewski
Axiory Global Ltd.
For the past few days SP500 follows every single rumour about the new tax plan. Yesterday, cards were finally shown and we received the details of the New Senate Tax bill. Apparently, it will not be as simple as expected and some cuts (like the corporate cuts) won't be implemented immediately. That is definitely not a positive information for the markets. If you are wondering why, let me remind you that vast majority of this year's upswing on stocks was made thanks to traders discounting the scenario of this tax cuts plan. Now, if this plan is not what they were expecting for, they may start to abandon their long positions and that actually was the first reaction here.
Let us see how the situation looks from the technical point of view. Additionally keeping in mind that recently every bad news is a good news for stocks, the situation does not look so bad. Yes, we had a drop but it was stopped on the mid-term up trendline (black) and on the horizontal support on the 2569 pts (green). What is more, the price performed a V-shape reversal. American indexes are well known for this formation. Most recently it happened on 19th and 25th of October (orange rectangles).
Yes, we do have some negative factors here, like the double top formation (grey, with MACD divergence) or the breakout of the red up trendline but the buyers have more arguments on their side. As long as the price stays above the green support, we do have a buy signal here with the potential target on the new all time highs.
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