Gold is modestly higher, having stabilized above the 1241.30/1235.82 support zone (trendline/200-day moving average). Some additional upside follow-through above the 1261.78 retracement level would be encouraging and help confirm that the pattern of higher-highs and higher-lows that has been evident so far this year, is still intact.
The Senate rolled out their secret healthcare reform legislation this morning. The accompanying headlines immediately indicated it did not have the votes to pass. The CBO hopes to score the legislation by next week, right before the Independence Day recess. That will give them just 3-weeks to negotiate and pass the reform before the month-long August recess.
There is talk about forgoing the August recess, but as long as this major piece of the President’s agenda is unresolved, everything else is probably on the back-burner. If that’s the case, markets are likely to get pretty restless by the final quarter of the year is there is no real progress on the fiscal front.
The DJIA is up about 17% since election day, based largely on expectations of deregulation, healthcare reform, tax reform and infrastructure spending. If none of that is actually happening by the end of summer, arguably a 15% decline to those election-day levels would make a lot of sense. That would put the Dow near bear market territory.
Failure to advance President Trump’s economic agenda would likely make the Fed rather nervous as well. They’re talking like they really want to raise rates again in September, but the market is just not buying it. If fiscal policy remains bogged down, I would expect the Fed to soften their hawkish tone.