Tax Reform

With the Tax Reform bill looking as if it will pass, markets thumbed their nose at North Korea.  Who would have guessed that money trumps a threat of nuclear attack?  With all this going one would have expected the VIX the have gone wild.  Oddly enough the VIX barely moved the entire day!  Futures markets want the party to continue this morning with Dow pointing to a gap up around 70 points.  Anyone caught holding short positions yesterday got completely run over by stampeding bulls.  A very good reminder that shoring an up-trending market is an unwise business decision.  Stay with the trend but avoid the temptation to chase and consider taking profits into strength.

On the Calendar

The Economic Calendar starts off with the very important GDP report at 8:30 AM eastern.  The 2^nd estimate for the 3^rd-quarter GDP is expected to come in higher at 3.3 vs. the 3.0 on the first reading.  Oddly enough consumer spending is expected have nearly paused, up from 2.4% to only 2.5%.  The overall GDP Pirce index is expected to remain unchanged at 2.2%.  Janet Yellen speaks at 10:00 AM while the Pending Home Sales Index reports.  Consensus expects a sharp rise of 1.0% in October pending home sales.  At 10:30 AM is the EIA Petroleum Status report which they don’t estimate forward, but a recent pipeline problem may have decreased stockpiles.  There is another Fed speaker at 1:50 PM followed by the Beige Book at 2:00.

On the Earnings Calendar, I see 49 companies reporting results today.  TIF is one of the companies reports before the bell while LZB, HOME, JACK, and WDAY are among those reporting after the bell.

Action Plan

All four major indexes ignored the threat of a North Korean nuclear attack setting new record highs across the board.  Amazing and just a little spooky is the fact that the VIX barely moved yesterday in response to such a strong rally.  Very odd.  Even the IWM pitched in yesterday showing nice energy as it reacted higher from price support.  Logic would suggest after such a big move the market would take a rest, but currently, futures are pointing to a gap up of nearly 70 points!  The surge in bullishness seems to be the direct result of the Tax Reform bill looking as if it will pass.

Thank goodness we stuck to our rules and continued to trade with the trend because we were nicely rewarded yesterday.  Continue to trade long but please avoid chasing as this kind of wild bullishness can suddenly find profit takers.  Remember the rule, take profits into strength!

Trade Wisley,

Doug