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Will the markets like Obama's plan more than Bush's?
The S&P 500 kinda hovered around the even mark today ... and it was one of the narrowest trading ranges in recent weeks ... volume was down ... and everything points to one thing - THE STIMULUS
Is it pork filled? Will it create the jobs necessary? What will the final tally be? Who knows? All I know is that it is inevitable.
And I also know that the last time Congress appropriated anything close to this amount of money - in the TARP bill - bad things followed for the stock markets.
I remember at the time thinking "thanks for the bailout, we're selling anyway". I made sure I had my dates right and found a source at the San Francisco Chronicle (quick google search). Here is a chart of the S&P 500 since the TARP was signed into legislation by President Bush:
My arrow is approximate, but the point is pretty clear - just because the bailout or stimulus passes, it doesn't mean the stock markets will approve
Don't believe me? Remember just two weeks ago when the House passed its version of the stimulus package? I do - it was a Wednesday night at the end of January - look what happened after that:
So what does that mean for when the Senate passes the stimulus package tomorrow? Well it is easy to think that the stock markets will sell off, but the real answer is that nobody knows. The tricky part of this is that once the Senate passes it, they will have to go back to the House to eventually come together with a plan for the President to sign.
I think it is as easily conceivable that the markets will rally on this news as it is conceivable that they will sell off. I can tell you that the last couple of days of trading have seen new recent highs on lower volume. That is bearish. We closed below the 50 day moving average, which is also bearish.
But I've been bearish for some time now - I've got several short position with a long hedge. We will have to see.
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