The Healthcare Vote and QID, DXD, SDS and TWM

Is the outcome of the healthcare vote that important? 

The better question is, what’s more important, news or the direction of the market?

Sign Up for Free Trial

Here’s what we know about the market’s reaction to the healthcare vote so far:

  1. The market declined aggressively on Tuesday Morning when it seemed as if the healthcare vote might not get through the House.
  2. On Thursday when the vote was delayed the market retraced from an attempt at higher levels.
  3. On Friday when the GOP suggested they might not have the votes the market fell again from an attempted rally.

By looking at the ETFs associated with the markets we follow we can clearly see that the market does seem to care, the question as to what extent. 

Performance since Tuesday Morning:

ProShares UltraShort QQQ (ETF) (NYSEARCA:QID) is up 2.1%

ProShares UltraShort Dow30 (ETF) (NYSEARCA:DXD) is up 2.22%

ProShares UltraShort S&P500 (ETF) (NYSEARCA:SDS) is up 2.48%

ProShares UltraShort Russell2000 (ETF) (NYSEARCA:TWM) is up 4.81%

Interestingly, these short-based ETFs also are lower from Wednesday’s highs.  The most pronounced is the Russell 2000 short ETF, TWM, which fell by approximately 4% from its Tuesday to Wednesday game, which was over 8%.  The decline in the Russell 2000 was aggressive over that 24-hour time span, but since then the Russell 2000 has increased, and so have the other markets, although still under water from where they were in the morning on Tuesday.

The market has been reacting to the healthcare vote because perceptions about Donald Trump’s ability to get the deal done rest on his ability to get this deal done in some circles, and in some circles his ability or inability to get this deal done may directly influence his ability or inability to get a bill passed that would create fiscal stimulus, but these are two different negotiations.

In fact, given what has happened after Tuesday there is serious doubt that this bill will get passed, but still wall street had what looked like a pent-up bid.  Has this been priced in?

A no-vote may be expected now.

Because no one really knows, this news can be argued in both directions, but there is one truth that exists and that is that this market declined on Tuesday from a resistance range to a support range, our clients secured gains from the short side positions they held from the resistance range when that happened, and by rule we are using this support range as an indicator for trading decisions now.

If you want to weed out the noise you need look no further than the technical support and resistance ranges that the market is providing and that we have provided to clients.