The Trump Scenario played out in the markets and everything looked great for a bomb lower in the morning and then a buy the dip with good stocks. -800+ points on DJ30 futures, -200 NASDAQ, -100+ SP500. Carnage with protectionism, upheaval in the healthcare markets, and as one CNN reporter put it, frogs raining from the sky. Oh, let's not forget locusts, earthquakes, pestilence, and famine.
It played out -- at least until the market open. The Dow was off 200 points an hour before the open, but by the open it was streaking higher, moving from negative to positive in just minutes. The rest of the market of course followed. Moreover, they never looked back. DJ30 hit was within 40 points of an all-time high and was bumping new closing high levels until a dip just before the bell. Hello? Mark Cuban? Is there going to actually BE a market crash, one that lasts longer than a flash crash? Heck, if more people knew the 'Trump Dump' would have lasted less than 12 hours (and during a period when the major markets were closed), maybe they would not have been so scared of Trump. Do you get the feeling Cuban wanted the dive just for a an opportunity to put a billion or two to work in the market at a lower price? Hmmm.
SP500 23.70, 1.11%
NASDAQ 57.58, 1.11%
DJ30 256.95, 1.40%
SP400 1.80%
RUTX 3.10%
SOX -0.49%
VOLUME: NYSE +56%, NASDAQ +58%. Respectable volume. Ha!
A/D: NYSE 1.2:1, NASDAQ 2.5:1. Surprisingly weak.
Why the violent moves? It would appear that the market prefers the possibility of pro-growth tax, regulatory, and other policies to tired, worn out Fed-based 'stimulus' that inflates financial assets but does not really produce economic growth. We should all know: the past 7 years have provided a real time laboratory of this system. Compare that to the US coming out of the same kind of economic malaise of the 1970's as it has now and with the policies put forth by Reagan. Indeed, those are the same kind of policies designed by the Trump economic advisors. Again, perhaps the market likes that idea.
There is no doubt the bulls were still very much there. Over 800 Dow points lower was bought overseas, and by the time the US markets were prepping to open the deficit was 200 and falling. Then, almost a new high on the Dow. The bulls bought, aggressively, the dip, suggesting still a lot of upside oomph.
Metals and materials (infrastructure spending), particularly US-based; health care (dismantling the ACA), energy, industrial machinery all surged. Investors and speculators were taking shots at any area they thought would be touched by Trump policies.
Some powerful moves by specific sectors drove the indices higher. The indices are trying to break up the toppish patterns formed back from July into September and October. As noted DJ30 is bumping the old highs; that pretty much says the top is breaking down. SP500 has a way to go to break up the top but it has rallied deep into it. SP400 shows the same action but not in as good of shape. RUTX exploded higher but still has a way to go.
NASDAQ and SOX are not as great. SOX gapped lower but managed to move up off the 50 day MA's to just below the summer 2016 up trendline. NASDAQ rallied back up through the 50 day MA's to the August highs. NASDAQ is within striking distance.
All are in striking distance to move to higher highs, they just have to show the same kind of bids and buying interest after this rush higher.
We took part of the gain on FCX as it gapped and surged. Bought some WLL and Z. Had to close some of the downside (DIA, DNKN, SPY) as some were too strong and powered through resistance.
Now we see what kind of staying power there is. Huge move higher Wednesday and also Monday. Kind of a 'whew' Trump will lose rally then a 'if you can't beat them, join them' trump victory rally. How long will the love affair last? Can it complete breaking down the rounded tops that formed?
We will look at more good upside plays to see if they can break higher but also watch now the indices and stocks trade as they again take on those prior highs. Not a done deal yet (as was the election last night for several hours), but working on it.
Have a great evening!
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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