Biden infrastructure bill and Stock Markets

Biden infrastructure bill and Stock Markets
Analysis
Ahura Chalki
Author:
Ahura Chalki
Published on: 03.08.2021 15:17 (UTC)
Post reading time: 1.86 min
1022

Can Biden`s bill move the August?


Last Friday, the Senate agreed on Biden`s infrastructure plan. The main reason for this fast and comprehensive margin confirmation is Biden`s top priority of renovating roads and bridges, which both Republicans and Democrats agreed on that. 

About this plan and that it will be passed in the Senate is no doubt, but the question is what will happen with Nancy Pelosi`s agenda. Mrs. Pelosi tied this plan to a separate $3.5 trillion spending package on fighting poverty and climate change. However, the House majority is with Democrats, and it guarantees the passing of another round of liquidity injection, even if it will be indirectly. Market participants predict it will ultimately pass the Senate and House, eventually reaching Biden`s desk for him to sign it into law, during this week. 

The main question is the impact of this plan on stock markets. In past months while investors are worried about the FED tapering plan for the Asset purchase program, passing this bill will be new and alternative stimuli. So it will decrease the impact of Bond purchase tapering, while the long term of this plan will be the more and faster growth of inflation. Higher inflation also means the change in the FED policies, especially rate raise to control the liquidity and inflation. So, while we can see it as a market booster in the short term, higher inflation and new policies will cool the market bulls in a bit long time. 


DJI: Technically, since May, the asset mostly trading between 34,000 and 35,000. 39,900 is the critical support, and as long as Dow Jones is trading above this level, we have to wait for higher numbers; while breaching this level, it will probably put the 200 DMA at 32,370 in the spotlight at the end of 2021, before new uptrend tarts. On the daily chart, we can see RSI around 55, with decreasing OBV trend line, which means the market signals the possible change in the trend. However, since Parabolic SAR cannot confirm any possible trend change, we have to wait for its confirmation. Bulls still can go forward, but with much less power, while we are waiting for a confirmation signal to start selling. 




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