"It has long been an axiom of mine that the little things are infinitely the most important."
-- Arthur Conan Doyle
The indices are rallying again on the likely passage of the Republican tax bill today. That passage has been priced in numerous times, but the way the market works these days is that each headline triggers a new wave of computerized buying. It is irrelevant that the same news has served as a catalyst a number of times.
Good earnings news from Micron Technology Inc. (MU) and FedEx Corp. (FDX) are also helping the bulls this morning. The FDX report is particularly notable as the CFO predicts a positive impact from the tax bill and better-than-expected GDP as well.
The tax bill has been one of the drivers of this market since the election. The hope of a substantial cut in corporate taxes and the reparation of overseas cash has long been anticipated as a major economic driver.
The critics of the tax bill focus on the benefits to the middle class. There is no doubt that the bill is lacking in that regard in many ways, but the intent had always been to reduce corporate taxes so that the United States is more competitive and would attract more investment. From that standpoint, this tax bill is a success.
However, due to politics, the bill could not be sold as a boon to business -- it had to be sold as beneficial to the middle class, which wasn't the real intent. But for purposes of the mid-term elections that will be the important thing.
This tax bill is unquestionable good for business and the stock market, but the big issue is: "To what degree is it already discounted? Is this a setup for a 'sell-the-news' situation?"
The things that make answering those questions complicated are the impact of positive seasonality at the end of the year and tax positioning. I believe there is a high risk of a sharp dip in the indices at some point prior to year's end. In 2016, the last three days of the year were negative despite some good seasonality in December. There is a tendency to book some gains and losses at the end of the year, which often results in selling pressure.
The bitcoin frenzy has cooled, but related stocks remain quite active and are great vehicles for aggressive traders. On my radar this morning are Gridsum Holding Inc. (GSUM) and Seven Stars Cloud Group Inc. (SSC) , which both have news that's driving gap-up opens.
Although I'm looking for a dip in the indices, I expect to see very good action in individual stocks, which is keeping me bullish. This is the best time of the year for trading individual stocks, and with the opportunity in the bitcoin sector it is even better than usual. We shall see if the "sell the news" crowd can make any inroads. but watch individual stocks for the best opportunities.