News of a Vote

Yesterday we saw some selling on worries the Tax Reform bill would not get finished up.  This morning sentiment quickly changes as news of a vote and passage could happen as early as today.  I hate politically driven markets because as retail traders our edge simply disappears into the spinning black hole of the news cycle.  Futures are not pointing to a significant gap up that will put a lot of pressure on those that got short early.  Let’s keep in mind that a Dow 25,000 print is not that far away so don’t expect the bulls to give up easily.  Perhaps the passage of tax reform is all the fodder needed to encourage the bulls to push higher.  I think the road ahead could be a bit bumpier than we have seen this week.  Plan carefully and remember to take profits.

On The Calendar

We kick off this Quadruple Witching Friday Economic Calendar with the Empire State Mfg. Survey at 8:30 AM Eastern.  The survey has been running very hot all year which some have warned is at unsustainable levels.  Consensus sees a December decline to 18.0 vs. Novembers 19.4 reading.  At 9:15 AM is Industrial Production which forecasters see gaining 0.3% in November.  We have a couple of mid-day reports that are unlikely to move the market and then Treasury Internation Capital at 4:00 PM that has no forecast.

On the Earnings Calendar, we only have 12 companies reporting none of which are particularly notable.  However, have a plan if you happen to own one of these companies.

Action Plan

The market found some sellers yesterday across all 4-major indexes due to the uncertainty surrounding the Tax Reform bill vote.  Both the DIA and the SPY left behind bearish engulfing patterns, and I suspect many began to predict a market top placing short positions.  During the evening we heard that the conference revised Tax Reform bill will likely get a vote as early today.  Plenty of time for the President to sign off on before year-end assuming it passes.  Consequently, the futures are responding with bullish glee and early short traders are likely to feel some pain.

Up to this point, this last rally has seen very little volatility, but I would not be surprised to see that change very soon.  As we head into the weekend, I normally am more of a profit taker than one looking for additional risk.  That’s not likely to change today but never say never.  Price is King, and I will follow price action that sets up a good opportunity for profit.

Trade Wisely,

Doug