Morning Market Thoughts

Good morning. Futures are down today after a big party yesterday as traders responded to the new proposed tax reform plan. The usual aftermath of a widespread breakout is a pullback. So much money is put into the market at the same time that the resulting move in stocks makes them less attractive at yesterday’s prices. The aggressive money has been exchanged for stock, and the more prudent money decides to wait for the buzz to subside. The ultimate result? A bit of a hangover.

Just a couple of thoughts on the proposed tax plan….

1. Predictions that economic growth will, or will not, result from targeted tax cuts are about as worthless as the Zimbabwe dollar. The FOMC’s is batting 1.000 in predicting the impact of monetary policy on economic growth, inflation, and the unemployment. And those folks are supposed to be some of the smartest economists around. The problem is that they all studied the same stuff in school — and it’s the wrong stuff. So whether or not the new tax plan will have the intended impact is unknown. Period.

2. If international business are able to repatriate overseas cash at a low rate, the megacap stocks like AAPL, CSCO, QCOM, AMGN, and MSFT will benefit.

As for today, Thor Industries (THO) reported strong earnings and is up nearly 4% pre-market. Given the pre-earnings run up in the stock price, it makes sense to be taking profits into this climax of buying — at least partial profits.

Also, just a reminder that the biotech sector is in a squeeze. Check out the SPDR Biotech ETF ($XBI). I’ve got an alert set at $85.50 — just slightly above current levels. A move to that level will likely happen today, and that just MIGHT lead to a breakout.

You might also want to watch Boeing (BA). Theresa May is threatening to blacklist Boeing after the US imposed a tariff on the Bombardier passenger jet. I think the market has been anticipating this event for the past week or so because Boeing has been rolling over. We have a bearish position on BA in the Option Market Mentor trade ideas, and it’s doing well.

See you in the forum.


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