As shown in the chart below, the Dow has just broken below its support level at the 10,100 mark. This support was formed by the peak in the index in mid-October. Some commentators have been blaming the drop on more tax proposals in Obama's State of the Union speech last night. But even if you think this is the cause of the decline, it shouldn't really scare you too much since the proposals still have to be passed into law. There have been many tax proposals during the rally that haven't even come close to passing. In the current political environment, it's going to be hard for Congress to implement anything that will be interpreted as a hit to the economy, especially in an election year. So if the market is falling because of tax proposals, it's likely to be short lived since the likelihood of actual passage is low.
Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.