Bulletproof?

With the futures pointing to a 200 point gap up in the Dow on the back of the Tax Reform bill passage, it would seem the market is bulletproof.  Even the threat of nuclear war seem to be nothing more than an annoying mosquito easily shooed away.  Now the Dow has 25,000 in its cross-hairs and seems to have all the money and energy necessary to drive for that goal.  However, I doubt the ascension to this plateau will be a smooth one.  Friday’s full reversal intraday whipsaw may be a clue to fast and whippy price action ahead.  Big price action swings could be possible as we move forward making it very challenging for swing traders.  The bulls are obviously in control, but Friday’s price actions should serve as a reminder that the bears are still here and they have been waiting to eat for a long time.  Plan your risk carefully.

On the Calendar

On the First Monday of December, the Economic Calendar has a light day.  At 10:00 AM we get the Factory Orders report which will likely show strength and confirm expectations for fourth-quarter manufacturing strength.  After that just a few bound auctions and a nonmarket moving TD Ameritrade report.

On the earnings calendar, we have 14 companies reporting today.  A quick scan of the list and I don’t see any that are particularly noteworthy unless of course, you happen to own one of them.  Make sure to keep checking and remember you’re the boss. Expect the best from yourself.

Action Plan

Last Friday I suggested that the market was going to be very sensitive to the news and to prepare yourself for possible violent price moves.  During the Flynn testimony, we go just that!  A very fast and nasty whipsaw that looked like it had completely reversed in just 20 minutes of trading.  The promise of the tax reform bill likely to pass in the Senate revered it once again as the bulls regained control.

Now that the bill has passed the bulls are running hard this morning.  The Dow Futures are pointing to a gap up around 200 points and sending the charts into a parabolic territory.  One would think a huge selloff should be just around the corner, but I sure would not want to be betting against the strength of this bull run.  In fact, with Dow 25,000 in sight, it’s likely to attract the bulls like a moth to a flame.  Continue to trade with the trend but plan carefully and avoid chasing.  Expect elevated volatility with triple-digit gaps and whipsaws possible in the days ahead.

Trade Wisely,

Doug