Summary:
· The S&P 500 traded higher last week, gaining 0.9%.
· Healthcare stocks rose on a Senate deal to maintain the healthcare subsidies that were schedule to be cut.
· Markets jumped on Friday as the Senate passed a budget resolution that makes passage of potential tax cut plan more likely.
The stock market moved higher last week, with the SPX moving up 22 points to 2575.
On Tuesday, two US Senators announced a bipartisan agreement to maintain the healthcare subsidies that President Trump had signaled he would cut. This sent the Health Care Select Sector SPDR (NYSE:XLV) higher by 1.3%. The measure would still have to pass both houses of Congress.
On Wednesday, IBM (NYSE:IBM) surged 8.9% as its cloud business helped it surpass analyst earnings estimates 2 cents per share. This helped the Dow Jones Industrial Average close at 23,157 for the first time.
On Thursday, the Hang Seng Index closed 1.9% lower on concern over Chinese deleveraging and Hong Kong interbank rates. Apple (NASDAQ:AAPL) shares later dropped 2.5% on speculation of low demand for the newly-released iPhone 8. The S&P 500 (SPX) was initially down by 0.5% but recovered, ending the day marginally higher.
That evening, the Senate passed a budget resolution that would protect a potential $1.5 trillion tax cut from Democratic opposition. This sent equity futures higher and ultimately the SPX ended Friday 0.5% higher. Bitcoin also continued its drive higher, surging above $6000 for the first time.
The accompanying chart of the SPX shows our projection for this week: a move higher as the short-term cycle begins, with the potential later in the week to roll over as the cycle matures. The purple-dotted half circles at the bottom of the chart illustrate the short-term cycle patterns.