The pending passage of the Tax Reform Bill reducing the corporate tax to 21% and taking effect January 1st, 2018 rather than being delayed until 2019, will be one of the biggest positive catalysts for US equities in decades. The seasonal Santa Rally just got a solid footing for the market to finish a fabulous 2017!
The S&P 500 cash index has finished the 16th bar in the current weekly cycle. It is expected for the index to make a new high in the 17th week, the week right before Christmas. The sentiment is extremely bullish around this time of the year. The S&P 500 in on pace to target 2700.
In a different model, we project the DOW to reach 25,648 by the end of 2017. We also have a projection for the DOW to reach 28,045 by the end of 2018. However, we are not clear about the two-year cycle low in 2018. It is due for a two-year cycle low in Q1 2018, but the market can completely skip the two-year cycle as it has done in the past. So we want to see how the market opens in 2018 to see the likelihood of a sizable correction to produce a two-year cycle low in Q1 2018. We are kind of in a holding pattern in terms of deploying additional capital at this time.
While in this holding pattern, we do have a few short term trades in options. We would open near money calls for $VIAB, $INTC, $XLK, $AAPL and $MSFT. All these options expire on December 29th, 2017. In other words, we wish to use these options to capture the final Santa rally in 2017.
Good luck and cheers for a fabulous 2017!