Here’s What to Expect From Stocks Into New Year’s

The Trump administration last week passed the much-discussed tax reform bill and stocks rose. In reaction to this news, more sell-side analysts, as well as corporations, spewed bullish comments and some corporates even dished out cash bonuses to its employees.

stock market todayTo many mainstream media types this has translated into an “infinity and beyond” type of atmosphere. From a contrarian perspective, this alone could be enough to get all beared-up on stocks.

Yet, I respect the animal spirits for what they are, which is why I mixed in some structural and seasonal analysis to dissect the upward trend through an intermediate-term lens.

For perspective, in last week’s opening missive from Monday Dec. 18 I offered that while anything is possible, it would be more likely to see some sell-the-news reaction (to the tax bill) in the stock market in January than into year-end given the usual dynamics of benchmark-hugging fund managers having to chase stocks higher into year-end.

With only four trading days left in the year, and those wedged between Christmas and New Year’s, this trading week for many professionals is one of “less is more” and is more spent on administration than making any major portfolio positions. For what it’s worth, I suggest the same approach to ye faithful.

Large-cap technology stocks relatively speaking took a backseat last week yet looking at the chart of the biggest of them all, Apple Inc. (NASDAQ:AAPL) its six-week hiatus, i.e sideways consolidation phase may ultimately resolve higher with another breakout into the mid $180s as a next upside target. The upcoming earnings report on Jan. 30 must, however, be circled.

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Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day

One part of the stock market that acted well last week is oil and energy-related stocks such oil services stocks as represented by the VanEck Oil Services ETF (NYSEARCA:OIH) 0n the weekly chart below.

While a breakout has yet to occur in the OIH etf, a move above the $26 area would result in a break above the red 200 day simple moving average and likely toward a next upside target around the $28 mark.

As a side note, please keep in mind that quiet tapes (less volume) tend to float higher and thus are better not to be faded (shorted), all else being equal.

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Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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