Christmas Gift

With the promise of Tax Reform passing Congress today the futures are wildly bullish.  The President, of course, will quickly sign the new bill into law bringing a huge Christmas Gift to the market.  After the morning gap up the Dow will be in striking distance of a 25,000 print.  I would be surprised it the 25K hats, and t-shirts are ready printed and just waiting under the trading desks.  Earnings this week from, FedEx, Micron, RedHat, General Mills, Carmax, ConAgra, Nike, and Cintas could be just enough rocket fuel to propel the market higher.  Anyone caught short will experience significant pain this morning and will likely get squeezed out this morning.  Expect higher volatility and prepare for quick price action.

On the Calendar

Monday’s Economic Calendar is a light one with only the Housing Market Index report at 10:00 AM Eastern.  Home builders have been reporting gains in confidence as new home sales have been rising in recent months.  Forecaster sees the December index holding at steady matching the 70 reading in November.  After that, all we have is a bill announcement and a couple of bill auctions.

On the Earnings Calendar, we only have 11 companies stepping up to report results today.  Most notable today are CCRC and LEN which both report before the bell.

Action Plan

Friday’s market highlight reel would have to focus on the sudden strong move in the tech sector.  The QQQ’s reached out to a new record high close and regained market leadership.  The SPY and the IWM both had good days but ran into some profit-taking the last hour of trading ahead of the weekend.  Trends continue up, and the Bulls remain solidly in control.

With a weekend of wrangling, it seems Congress is finally ready to vote on the Tax Reform bill.  According to reports they now have the votes so they can comfortably pass the bill.  As a result, Futures are flying high with the Dow futures pointing to more than a 100 point gap up at the open.  Big gap up opens at market highs are dangerous to chase due to the possibility of a so-called blow-off top.  They are also often subject to violent whipsaws so don’t get caught up in the drama and chase.  At the open, the Dow will only be about 200 points from a 25,000 handle.  With some big earnings coming out this week, I there is a very real possibility the energy will be there to drive it up to that level before the end of the week.  I also think we could see an extra dose of volatility so plan carefully.

Trade Wisely,

Doug