As expected, Republicans now have majority in the house. Democrats maintain majority in the senate, but give up a couple of seats to the Republicans. If it was difficult for the Obama administration to pass legislation in the past, it sure isn't going to get any easier now. God bless the American two party in-fighting system.
In any case, what does this mean for stocks? Well, so far it is a positive sign as the S&P 500 Futures traded up to new highs in the GLOBEX session and is currently trading above yesterday's high in pre-market activity.
We'll have to wait until 2:15pm EST to hear the FOMC announcement where the market focus will be on what is said about a second round of quantitative easing. Anything short of a $500 billion dollar injection, most likely in the form of buying US treasuries, will probably send the market into sell mode. There is plenty of dissension among policy makers in terms of what the real benefit of printing more money will have on the economy. For this reason, there is a good chance the market will eventually sell the Fed news. Maybe the initial move is up, but without a substantial 2nd round of QE, expect the markets to sell-off into the close.
I expect choppy trading today ahead of the FOMC announcement. Expect the overnight highs to be tested at 1196-1197, but ultimately, the real action will unfold after 2:15pm EST, at which point I will be looking to get short anywhere in the upper 1190s on the ES. Of course that depends on the Fed, but we'll see...
Levels to watch on the ES:
Resistance above at 1196-1197, 1199-1200, 1205-1207
Support below at 1190-1191, 1186-1187, 1180-1182, 1175-1177, 1169-1172
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