Ok so for some reasons people are asking me about the stimulus plan. First let me say I am not a CPA nor do I play one on TV. So I think its best if I share the info my CPA sent me. Hope it helps.
I hope everyone is doing well, staying safe and not getting to stir crazy.
As you probably know, the Stimulus Relief package (CARES Act) was passed by the House and Senate and awaits the President’s signature.
There are many tax provisions in the bill. Many details are not yet available but I will summarize the major provisions here:
Checks to individual taxpayers
Individual taxpayers will receive a recovery rebate check of $1,200 per individual ($2,400 for married couples filing jointly), plus $500 for each qualifying dependent child, as soon as the U.S. Department of the Treasury (Treasury) and IRS are able to process these payments. The recovery rebate begins to phase out for taxpayers whose adjusted gross income exceeds $150,000 for joint returns, $112,500 for head of household and $75,000 for all other taxpayers.
The amount of recovery rebate a taxpayer receives is based on information reported on the taxpayer’s 2019 tax return (or 2018 if the taxpayer has not yet filed a 2019 return). For individuals who did not file a return in either 2018 or 2019, the IRS will use the individual’s 2019 Social Security income. Within 15 days of payment, the IRS will send each eligible taxpayer a letter to a last known address with details of the amount, date and method of payment, along with a number to contact if the taxpayer did not receive the payment
The CARES Act provides expanded unemployment insurance benefits for individuals (including those who are self-employed) who become unemployed, partially unemployed or are unable to work due to COVID-19 on or after January 27, 2020, and on or before December 31, 2020. In general, the unemployment benefit a recipient receives is increased by $600 per week (referred to as Federal Pandemic Unemployment Compensation). Benefits may vary by state
The very big news here is that the self employed (business owners) are now eligible for unemployment benefits
-Individuals can withdraw up to $100,000 from their retirement accounts. The distributions are still taxable but the tax can be spread over a three year period. The 10% early distribution penalty is waived.
This only applies if you or a spouse is diagnosed with the Virus OR if you have experienced any adverse financial consequences due to the Pandemic (basically everyone).
The funds can also be repaid to the retirement plan within three years, thereby avoiding any income recognition.
-Required minimum distributions are temporarily waived for certain accounts (need more detail here).
-The maximum loan that can be taken from a retirement account (not an IRA) has increased to $100,000 from $50,000
Major Business Provisions
New loan program under the SBA (I will also send a separate email regarding this provision as more detail becomes available)
The 7(a) loan program, administered by the U.S. Small Business Administration (SBA), provides financial assistance to small businesses. The CARES Act authorizes an additional $349 billion for general 7(a) business loans. For SBA Express loans, the statutory $350,000 limit is increased to $1 million through December 31, 2020. In general, the SBA responds to Express loans within 36 hours (compared to standard 7(a) loans, which may take weeks to process).
Recipients of 7(a) loans may be eligible for loan forgiveness on covered loans in an amount equal to the sum of the costs incurred on or after February 15, 2020, and on or before June 30, 2020, due to payroll cost, mortgage interest payments, rent or utility payments. The CARES Act also gives the SBA authority to provide paycheck protection loans to help employers cover costs, including wages, paid leave and state taxes on employee wages. These benefits are available to employers with no more than 500 employees, including nonprofit organizations.
Big news here is in the second paragraph.
Employee Retention credit (I will also send a separate email regarding this provision as more detail becomes available)
For wages paid after March 12, 2020, and before January 1, 2021, eligible employers (including tax-exempt organizations) would be allowed a new refundable payroll tax credit equal to 50 percent of the qualified wages paid. The total eligible wages per employee are $10,000, resulting in a maximum credit of $5,000 per employee.
Delay of payment of employer payroll and self-employment taxes (I will also send a separate email regarding this provision as more details become available)
The CARES allows employers to delay remittance of their share of Social Security tax that would have been deposited between the date of the CARES Act’s enactment and December 31, 2020. Instead, 50 percent of those taxes must be deposited by December 31, 2021, and the remainder deposited by December 31, 2022.
Similar relief is provided for self-employed individuals under the CARES Act. However, those taxpayers still must pay 50 percent of the Social Security tax portion of these self-employment taxes, i.e., the employee’s share, in the same manner as usual. Employers who have had indebtedness forgiven under the Small Business Act are not eligible for this payroll and self-employment tax deferral relief.
Monday: DOW falls 582 points because stimulus plan is stuck in Senate
Tuesday: Wow…stocks have their best day since 1933!
Wednesday: We might get the WORST economic report EVER tomorrow
Thursday: 3.3 million unemployed and stocks have biggest 3-day rally since 1931?!?
Friday: Stimulus Bill signed, but Dow slides 900 points
I’ll give you a quick rundown of what's been going on.
The Fed stepped in yesterday and announced an emergency interest rate cut before the pre-market trading session opened. When the markets did open, equity index futures immediately traded 5% lower, and were locked limit down until this mornings 8:30 AM CT opening bell.
Once regular trading hours commenced, stocks continued to fall, triggering the 7% circuit breaker and forcing a trading halt. Since then, things have calmed down a bit, but volatility is still at extreme levels.
The violent swings we continue to see can be very unforgiving when you make a mistake, so please stay diligent when attempting to trade this week - we expect this volatility to continue !
Monday: Stocks plummet & exchanges stop trading – worst day since financial crisis!
Tuesday: Trump stimulus talk helps markets – but is it enough?
Wednesday: Stocks hammered – and we’re now officially in a “bear market”
Thursday: DOW has the worst day since the 1987 crash
Friday: Stocks had their biggest rally since 2008 after Trump declares a National Emergency
Well, after losing 10% Thursday, the equity index futures were locked limit up in pre-market trading this morning. This is truly unbelievable. Even though we’re happy to see some optimism in stocks, the extreme volatility to the upside is just as dangerous as the downside, so again we urge caution when trading during these volatile times.
Last night stock index futures reached their respective 5% limit down levels. After this morning's 8:30 AM CT opening bell, trading limits were extended, and markets continued to trade lower, eventually triggering the 7% circuit breaker level where trading was halted for 15 minutes. The next level down is 13%, where trading could possibly be halted for another 15 minutes, and then the 20% level, where trading will permanently halt for the remainder of the session.
Since the inception of the circuit breakers after the 1987 stock market crash, when the Dow Jones Industrial Average fell more than 22% in one day, the 13% breaker level has never been triggered. There is a threat of this happening today. It’s easy to get swept up in the news, so try to remain calm. We’ve been here before.
Stay patient, sit on your hands, observe from the sidelines. Understand how the markets are digesting this information.
Trade with extreme caution:
In the last two weeks we have been sitting on our hands only entering trades that are the highest quality, defined risk, and not holding over the weekend.
I posted a $TSLA setup from the chat room that worked out nicely. Even if you held too long the level is holding. But the goal of any trade should be to have a plan for both entry and exit. Also the Euro set up in the previous video worked out nicely.
The /ES futures are a good gauge for the broad market strength. And it just entered a weekly zone where we can look for a reversal to the upside. We can look for a partial move to the upside into 2800 or so possibly more.
If this breaks down below 2862 there's not much support below.