Market Alert - To the Close

For most of the market it is a sluggish day, kind of a hangover from the Friday large cap surge on solid earnings from some of the largest large caps on NASDAQ. Modest pullbacks for most, though some areas are struggling, e.g. some retail stocks. Small caps are getting a significant beating, well ahead of the rest of the market as RUTX breaks below the 20 day MA and flirts with last Wednesday's intraday low.

SP500 -6.95, -0.27%
NASDAQ -0.42, -0.01%
DJ30 -64.79, -0.28%
SP400 -0.70%
RUTX -1.33%
SOX +0.19%

Tax reform and Manafort dominate the discussion. As for the latter, Manafort pled not guilty to the charges of tax fraud, claiming the actions were developing business for the US. That all remains to be seen, but it occurred years before the election campaign and indeed just doesn't have anything to do with the election. Oh well, perhaps it will return some money to the treasury to go against that $20T debt.

Taxes: The super secret tax reform proposal to be released Wednesday has rumors flying. When you keep things secret, you beg for rumors. Anyway the 401K deduction amount continues to be an apparent negotiation point along with deductibility of state taxes and mortgage interest. All special interests are lining up and howling in despair and 'outrage.' Then the craziest report: the plan could be implemented over 5 years or more. Oh THAT will go over well with everyone wanting tax reform and wanting it now. 'Political suicide' as one put it.

It appears we have learned one thing in the US: he who screams the loudest and does not care about whose rights are stomped upon wins. What a grand way to operate.

The indices overall look fine. RUTX does not look great. Not so much for today's drop -- it is still over last week's low -- but the resumption, or more accurately the continuation of the day to day volatility continues for this important group. If money is all going into large caps again, however, should this be a concern? Well, if people don't want small caps that is something of a vote that the tax reform will not amount to much and best get into the big NASDAQ names that won't feel that impact.

Closed some retail that is struggling today. Picked up some CREE and that is working well. Looking at ENPH as well.

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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