Using the S&P 500 as a proxy for broader market performance, and thus rendering that index as a constant, one can easily see the underperformance of both the small caps and the transports as the year 2017 has progressed.

Condensing the chart to just the last month, one can easily see how these two indices came to life in the last week or so, as the Senate made significant progress toward tax reform.

Illustrated here as well is the underperformance of the two areas most likely to benefit from tax reform versus the broader market on Friday, as fears of that now corrected news story impacted investor expectations for the entire Trump agenda.

The question now is, with that story put seemingly away for now, how much more needs to be priced in?

Before You Go

The House was busy on Saturday. Seemingly under the radar this morning, House Republicans gave birth on Saturday to legislation meant to keep the government running for a couple more weeks when funding expires this Saturday. The full house should vote on this bill by Thursday, at the latest. This is a two-week patch that itself will expire on Dec. 22.

Lawmakers are clearly having trouble agreeing on a fiscal 2018 budget. The fiscal year actually began with October, but at least if the lay of the land regarding the nomenclature of the tax code is a known, then something concrete can be done on this front. This is probably being taken as a mild positive by overnight futures markets, adding to the morning's risk-on feeling. My gut feeling? We probably go through putting together another short-term patch in two weeks.

(This is an excerpt from Stephen "Sarge" Guilfoyle's Morning Recon, which now appears exclusively on Real Money, our premium site for active traders. Click here for a free 14-day trial and receive Morning Recon every day, along with exclusive columns from Jim Cramer, James "RevShark" DePorre, technical analyst Bruce Kamich and more.)

WATCH: Jim Cramer on What Tax Reform Means for the Markets

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At the time of publication, Stephen Guilfoyle had no positions in the stocks mentioned.

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