From the Trading Desk

Trumps Tax Plan Released; Small Caps Leap Higher

The long-awaited release of the tax plan Trump has promised finally arrived on Wednesday prior to the market open. Futures were given a lift and after a morning hiccup stocks jumped higher led by the Russell 2000. Financials moved higher as rates continue to creep higher after the latest FOMC meeting. Utilities are sliding alongside bond prices. Real Estate is another sector not benefiting from higher rates. Monday’s selling has been erased and we are looking poised to continue higher. There were a lot of folks who were bearish after Monday and this story has played out time and time again. Volume was higher across the board and it is a good sign we are just lifting on vapor. There is some juice behind this move and it is a good sign.

Small cap stocks now are going to test the outer bands of overbought territory. We can see some continuation today, but we are closer to consolidation than anything else. Small cap stocks have been largely ignored since the end of 2016. The group did great after last year’s election, but stalled out for all of 2017 until recently. It will be interesting to see if the group can hang onto its gains, consolidate, and continue to hit all-time highs. It would not surprise us to see this happen through the end of the year. How many people remain on the sidelines even with these great gains? And will they panic and push a mad rush to buy stocks heading into year-end?

Good to see financials bounce back. It is no secret they benefit when rates are higher. The spread between what they pay deposit accounts and loans is their bread basket. Now, we await if the Fed will move quicker on reducing its balance sheet and raising rates one more time in 2017. The stock market reaction is what we will be focused on. There is no way to tell which way it will go until it happens. Focus on what you can control and what you can’t control ignore. A robust risk management process is paramount in this type of environment. Cut your losses and move onto what is working. We do not have time to waste.

We hope you have a great day of trading Thursday. Make it a great day.

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