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U.S. Dollar Drifting Lower as Trump Tax Hopes Dim

Worries about the tax plan's cost, focus on the rich may have it stalled out

Stocks drifted higher on Tuesday, as the biggest news of the day was a 4.5% rise in Wal-Mart Stores Inc (NYSE:WMT) after the company announced a $20 billion buyback over the next two years amid very confident forward guidance on its e-commerce ramp-up plans.

That was enough to push the Dow Jones Industrial Average to incremental new highs amid ongoing light volume, with the NYSE’s trading activity at just 84% of the 30-day average. Treasury bonds strengthened, the dollar was weaker, gold gained 0.7%, and oil rallied 2.7%.

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In a sign of the times, consumer staples led the way higher with a 1% rise, followed by utilities, up just a hair less. Financials were up 0.4%. Airlines were on the move, with American Airlines Group Inc (NASDAQ:AAL) up 4.8% and United Continental Holdings Inc (NYSE:UAL) up 4.7% on solid Q3 updates that cleared the air of concerns over competitive pricing.

AAL is closing in on its prior high from July near $54, as shown above.


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Political headlines seem to suggest the odds of an easy passage for President Donald Trump’s current tax cut proposal are slipping from possible to nil amid concerns about its cost and the share of the benefit that goes to the rich.

A breakdown in relations between Trump and so-called “establishment” Republicans in Congress isn’t helping either.

As a result, the U.S. dollar is drifting lower again as shown by the chart of the US Dollar Bullish Fund (NYSEARCA:UUP) above, after a multiweek reprieve from the downtrend that started in April as healthcare reform efforts faded to black. Should this continue, it will provide upward impetus to inflation pressure, which will encourage the Federal Reserve to stick with its aggressive policy tightening plans.

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Amid ultra-light volumes and ultra-low volatility, currencies are pretty much the only area of the market showing any kind of texture right now. Indeed, the folks at SentimenTrader note that despite October’s history as one of the most volatile and volume-heavy months of the year, trading activity in most of the primary index ETFs was among the lowest of the year so far.

The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) hit a new high, for instance, but on volume more than 25% below its average of the last three months; an average that was already quite low to begin with.

Check out Serge Berger’s Trade of the Day for Oct. 11.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers.

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