It is a pause day for the market as we await a few big earnings reports and the tax policy announcement later this week. The indices are close to dead flat intraday but breadth is positive and that is keeping the tone of the action upbeat.
Earnings from Apple (AAPL) will be announced Thursday night. That is probably the most important report of the quarter and expectations are rising as there seems to be a more positive buzz about the prospects for the iPhone X. The stock is up over 7% over the last three days and I would not be too quick to assume that positive expectations have been fully discounted.
It has been so long since the market has had a negative reaction to anticipated news events, like central bank decisions or economic news, that it is difficult to imagine what could shake it up, but the announcement of the House Republican tax bill that is likely to occur on Wednesday has the potential to create some volatility. The plan is still being ironed out and there is no doubt there will be plenty of folks unhappy with it no matter what.
The potential for a "sell the news" reaction is quite high if it becomes clear that Republican support is divided. The market will not have much tolerance for a delay in passing this long-awaited policy.
The market isn't acting like it is concerned about the reaction to this bill, but if we are going to see a short-term shift in market character, this is the event that is likely to be the catalyst.
Technically, this market continues to roll along nicely and there is no obvious warning in the price action. If you want to find negatives, you have to focus on valuation and economic arguments, neither of which has been effective timing devices.
The market has been running on the prospects of tax reform since the election, which is why this announcement is such an important event.