Watered down bipartisan stimulus package was proposed today

In the words of the famous rock group the Rolling Stones, “You can’t always get what you want, you can’t always get what you want, but if you try sometimes, you just might find, you get what you need.”

These words seem to be extremely applicable to an announcement made today that a group of moderate senators has released a new proposal that could be palatable to both political parties, and more importantly, passed and enacted this year.

This has been what so many unemployed Americans and failing businesses have waited for, financial support that will grant them a bridge between the vaccine becoming available to the public and the financial hardships that they currently face from the pandemic.

As recently as a few months ago negotiations between the speaker of the house, Nancy Pelosi, and the Treasury Secretary of the United States Steven Mnuchin ended in a stalemate in regards to the amount allocated for this next stimulus package. It seemed quite unlikely that any such legislation might come to fruition before the inauguration of President-elect Joe Biden.

This in the light of a growing need for additional stimulus as numerous businesses have fallen into such hard times that they have filed for Chapter 11 bankruptcy, and unemployed Americans feared what would happen once their unemployment benefits ran out this month.

According to Forbes magazine, a new $908 billion bipartisan stimulus proposal was released today. Forbes reported that “A bipartisan group of lawmakers announced a new stimulus proposal Tuesday in an attempt to resuscitate failed coronavirus aid talks in Washington before the end of the year, but the effort won’t make it far without buy-in from House Speaker Nancy Pelosi (D-Calif.), who wants a broad, multitrillion-dollar package, and Senate Majority Leader Mitch McConnell (R-Ky.), who wants a narrowly targeted $500 billion bill.”

According to information released, and reported by the Washington Post, the current proposal which will probably be revised if passed at all will include an additional $300 weekly enhanced benefit for unemployed Americans for an additional four months. It would also include $160 billion in aid directed to states and local aid as well as liability protections for businesses in the short-term.

Although there is still a tremendous gap to close to come to a consensus on the amount as well as how it is allocated this is the first real discussion since negotiations broke down two months ago. Other hurdles include the fact that by December 11, the executive and legislative branches must allocate a new budget to avoid a government shutdown. Additionally, the moratorium against evictions is set to expire on December 31. That being said this is extremely welcome news. Although any stimulus package will require major compromises to complete a bipartisan agreement, the fact that a bipartisan announcement of a $908 billion stimulus proposal is the first step to reaching an agreement and passing legislation.

The net result of this new proposal has given gold a tremendous upside boost. As of 3:00 PM EST, the most active February 2021 gold contract is currently trading up by $36.80 and currently fixed above $1800, at $1817.60. Gold gained over 2% in value, that net gain was dwarfed by silver futures gaining 6.65% in trading today. The most active March 2021 Comex silver contract is currently fixed at $24.10 after factoring in today’s current gains of $1.51.

On a technical basis, two significant clues can be seen in a daily candlestick chart of gold futures. First is the fact that today’s gains moved current pricing above gold’s 200-day moving average. Secondly, we can identify a simple two-day candlestick pattern called an engulfing bullish. The caveat is that it becomes valid only after the following daily candle confirms the pattern. This would consist of a large green candle, meaning the market closed above its opening price. And should also contain a higher high and higher low than the previous candle.

We are very cautiously optimistic and truly hope both sides can agree and implement a round of fiscal stimulus that is so greatly needed. While this is the first step, over the next few days we will see how high the probability is that these negotiations will lead to a package that can be voted into action.

It has been said that a journey begins with a single step, and it seems today that the first step was taken.

Wishing you as always, good trading and good health,