Market Alert - Pre-Market

Futures vs FV: SP +14.94; DJ +173.26; NASDAQ +44.08

Stocks are set to gap open in futures that were up early and have held gains all morning. The catalyst is credited to tax reform, the passage of which we are told is now a sure bet, so much so that even with McCain going back to AZ for health reasons the bill is expected to pass.

Are they counting chickens? We will know when the votes are cast and not even sure if that will be Tuesday as is or was the plan.

This news and the open today begs the question: is the tax reform now fully priced in? In the weekend report I talked about selling into the news of the passage, taking some profit in the glow of tax reduction and the promise of better economic growth ahead. That time may be coming faster than the actual news given the action of the futures.

Still, there are some great stocks in good position, hardly extended. Looking at INTC and others that are coming off tests, out of good patterns, or turning upside from long declines.


M&A: The other big story on the day. Lots of combinations.

CPB buying LNCE; HSY buying Amplify Snack; PENN buying Pinnacle; ORCL buying Aconex (Australian); HUM is rumored to be after Kindred Healthcare.

Talk about animal spirits.


Not a lot of other news this morning. The usual talk about NKorea. Saudi Arabia releases a propaganda film showing the invasion of Iran. Yes, the geopolitical issues are still out there, tax reform or no, but I will say that a rapidly growing US economy is the BEST way to address foreign relations because we then have the economic power to accomplish what needs to be accomplished.


OTHER MARKETS
Bonds: 2.378% vs 2.351%

EUR/USD: 1.1794 vs 1.1752

USD/JPY: 112.52 vs 112.534

Oil: 57.55, +0.25

Gold: 1262.30, +4.80


So, more new highs to come on the large cap indices and watching to see if RUTX can follow suit. SOX has lagged and the patterns are not great in many of the chips; how they respond today will be instructive on the depth of the market move.

Given RUTX, SP400 are not at new highs and indeed experienced pretty sharp pullbacks, there are opportunities to buy. Money started moving their way again last week and we will see if it continues as we have several plays in those stocks ready to go. Staying power on such a gap open is always a question, but money is chasing stocks right now. We will let that push up our current positions and see what we can get on new entries.

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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