S&P 500; US Indexes Fundamental Daily Forecast – Watch for Low Volume, Exaggerated Moves Due to Pre-Holiday Trade

If the early price action is any indication, U.S. equity markets are likely to open lower today. The markets may be under pressure from follow-through selling related to last week’s issues with U.S. tax reform and the Mueller investigation subpoenas of President Trump’s campaign records.

Political tensions in the Euro Zone may also be behind the selling as well as positon-squaring ahead of the U.S. holiday on Thursday.

At 1051 GMT, the December E-mini S&P 500 Index is trading at 2574.50, down 1.75 or -0.07%. The December E-mini Dow Jones Industrial Average futures contract is at 23302, down 14 or -0.06% and the tech-based NASDAQ-100 Index is trading 6310.25, down 3.00 or -0.04%.

In Asia, the stock markets traded mixed on Monday, mostly in reaction to the weakness in the U.S. markets on Friday. European equity markets are trading mixed due to political stability in Germany.

The key story at this time is coming from Germany where German Chancellor Angela Merkel’s efforts to form a three-way coalition government failed, stoking political uncertainty in the Euro Zone’s largest economy.

After the initial reaction to the news, the markets are clawing back its earlier losses. If this upside momentum continues we may even see it turn higher for the session. This may also serve as proof that that the problems in Germany are a local issue and not likely to curtail any of the European Central Bank’s plans.

Earnings and an economic report will be in focus today, but the main issues remain tax reform and the Mueller investigation. However, due to the upcoming U.S. Thanksgiving holiday on Thursday, they issues are not likely to be addressed until next week or even later.

Tax reform is the big macro factor driving the price action at this time. Traders are being cautiously optimistic about tax reform getting done this year.

On Friday, the U.S. Treasury Secretary Steven Mnuchin told CNBC that he foresaw a Republican tax reform bill to be sent to President Donald Trump by the end of 2017.

Late last week, House Republicans passed a bill that aims to overhaul the tax code. However, concerns remain about the Senate’s version of tax reform.

Be careful buying strength or selling weakness. Volume is often the lowest of the year this week. Moves may be exaggerated as robots take over the trade with many of the major players and institutions hitting the sidelines until next week.