I go to bed thinking Hillary is probably going to win, I wake up at 1AM to feed the baby and the world has gone all topsy turvy after getting Trumped. After seeing the results it's very hard to believe the media, the race wasn't even close. Now it's time, as Jamie Dimon so eloquently put it in a memo to his staff, for all American patriots to come together in open dialogue while we navigate these uncertain times. America will survive and there is hope for the future. Now that Mr. Trump is President-Elect Trump the pundits are seriously talking about his plans and the chances he just might be able to kick the economy into a higher gear.
Asian markets closed lower, they were closed before the relief portion of today's price action set in, but I do expect to see them rise in the overnight session tonight. European market action more closely matched our own, falling sharply in the early hours only to reverse those losses and turn them into gains near 1.5%.
The news was shocking to say the least. The global market sold off hard on TrumpenFear, the Dow futures hitting a low greater than -800 points in the overnight session, but it didn't last. I'd suspected there could be a Brexit-like bounce following the election, I just didn't think it would happen on the first day. By 9:30AM eastern time the market had largely recovered the early losses and was able to open with barely a tick of movement from yesterday's close. The first two hours of trading was a bit volatile as traders scooped up bargains where they could, the indices hovering around break even. By 11AM the market had fully shrugged off the early bearishness and committed to extending the week's rally. The market rose the rest of the day, gaining more than 1%, to close near the highs of the day.
Economic data was light today and probably a good thing, it would have been lost in the election story. The mortgage index fell -1.20% for the second week in a row as prospective home owners shy away from higher rates. Over the past 4 weeks the index has fallen a little more than -11%, the rate on a 30 year fixed is hovering around 3.75%
Wholesale inventories were revised down to 0.1% from 0.2% for the September reading. Ex-Auto's, an important factor in GDP, rose 0.4%. Investment in inventory rose by 0.6% while sales at the wholesales rose 0.2%.
There are only two economic reports of any importance left this week, the jobless claims data tomorrow and Michigan Sentiment on Friday.
The Dollar Index
The Dollar Index went on a wicked wild ride just like the equities markets and seems to be confirming support and a return to recent highs. The index fell more than -5% in the overnight session as the Trump news washed over the market only to rebound and close with gains near 0.75%. Price action fell to touch the 50% retracement line where they bounced, creating a large white candle with extremely long lower shadow. This candle qualifies as a hammer and confirms support at level. The indicators are rolling over into a buy signal, in line with the generally bullish outlook for the dollar, but have not confirmed so there could be some more sideways movement within near term trading ranges. Support looks strong at $97.20, resistance may come into play around the $99 level.
The CME Fed Watch Tool is still showing a 76% chance of rate hike at the next meeting.
The real story is the Mexican peso which fell -7.5% to a record low, if you have any desire to go to Mexico, buy anything from Mexico or buy into Mexico now is a really cheap time to do it.
The Oil Index
Oil prices were as volatile as anything else in today's session, making a 5% swing in the early hours to test support and then bounce back and move into positive territory. Support appears to be in the $44 range for WTI which closed above $45 with a gain near 1%. $45 may be the sweet spot for WTI, be on the lookout for news that may swing it one way or the other.
The Oil Index gained nearly 1.5% and created a long white candle. Despite this, and the rise in oil prices, the index remains range bound. Today's action looks bullish and may take the index up to the upper range boundary near 1,180 but will likely not break through unless oil prices are able to break above $50. The indicators are consistent with a shift of momentum within the range, and with the trading range in general, but are not strong or indicative of imminent break out.
The Gold Index
Gold prices skyrocketed on a weakened dollar only to slam into resistance above $1,300 and come crashing back to earth. Spot price went as high as $1,338 in the overnight session but fell back to $1,276 by settlement time. Today's action created an incredibly long upper shadow, confirming resistance at the $1,300 level, and could lead to further downside. Considering that FOMC outlook looks firm for a December rate hike the dollar is likely to remain firm if not move higher and pressure gold back to support. Support target is near $1,250, a break below that could go as low as $1,200 in the near term.
The Gold Miners ETF managed to close today's session with a gain but the candle and indications are all bearish. Today's candle is a long black candle and the third confirmation of resistance at/near the $25 level. The indicators are mixed; stochastic has confirmed with a strong signal while MACD has yet to reach and cross the zero line. Today's close is below support targets at the short term moving average and the 50% retracement level, next downside target is near $22.50.
In The News, Story Stocks and Earnings
Fear has left the market, more or less. Now that the election is over a certain amount of uncertainty has left, there is still some because the Trump administration is a wild card, and the VIX has responded. The index fell -20% after a moderately higher opening to hit the lowest level since before the 11th hour FBI email revelation. Today's action left it sitting just above the $14.75 level and looking like it will continue to fall back toward low levels near $12.50.
The Health Care Sector got a big pop, nearly 4%, on the hopes that the unaffordable care act will get fixed, repealed, corrected or something. Matching this was a similar move in the health insurers which gained 3% to 4% on average, led by Cigna's near 5% gain. The real star of the health care complex was Magellan which also happened to report earnings before the bell. The Company reported earnings that beat on the top and bottom lines and raised full year guidance to range whose low end is 4% above the previous guidance and 20% above the consensus estimate. Shares of the stock soared nearly 18% on the news.
Mylan reported after the bell. The company was expected to report year over year growth in both revenue and earnings and delivered one out of two. Revenue grew 13% year over year while adjusted earnings came in down -3%. Headline GAAP earnings per share was a loss of -$0.23 due mainly to epipen issues, and some other issues plaguing the company. Shares had been up as much as 7% during the day, closed with a gain near 5%, and then fluctuated around those levels in the after hours.
Today's action really was a tale of two markets. The early, overnight, preopening session was nothing but bloodshed and carnage; the indices fell more than 5% and looked like the onset of serious selling. The surprising thing was that it just didn't last, as soon as the Trump victory was secured futures began to rise and kept rising into the open of the session and throughout the day. The star of today's show was the Dow Jones Industrial Average which gained about 1.70% and tickled a new all time high. The blue chips created the longest white candle in many many years. Today's range was nearly 800 points and that is not counting the deepest of the overnight losses. The candle is strong, moving up from the long term up trend line, breaking through to a new high, and is confirmed by both indicators. Looks like a pretty strong buy signal to me although tomorrow may not be the best day to go rushing in.
The Dow Jones Transportation Average made the smallest gains in today's session, only about 1%, but managed to make a new high relative to its recently broken trading range. The transports extended their break to new long term highs and are confirmed by the indicators. Next upside target is near 8,500.
The S&P 500 made the second biggest gain today, nearly 1.25%, after losing more than -5% in the pre-opening session. The index created a large white candle moving up from the 2,120 support line and a long term up trend line. Today's action took the index up above the short term moving average to approach the current all time high and is confirmed by the indicators. The all time high is less than 1.5% above today's close and could be easily reached this week if upside momentum continues.
The tech heavy NASDAQ Composite made the third smallest gain today, near 1%, but is also quickly approaching the current all time high. The index created a long white candle and close above the short term moving average and a previous all time high. The indicators are rolling over and beginning to confirm the move although it is not complete. Next target is the current all time high, near 5,340, a break above that would be bullish.
Today wasn't so much about Trump as it was about the election. The uncertainty is mostly over, instead of two wildly different agendas that may or may not be the future, we've got one agenda to focus on the possibilities it brings. In terms of the market, business and the economy... I'm hopeful.
From a business perspective I can understand how the thought of tariffs on goods returning to the States is concerning. Mitigating that I think is the chance to repatriate off-shore earnings at a reasonable tax rate and a more competitive corporate tax rate here at home, both of which will help free up cash for investment and growth. At the same time, a more competitive tax rate and the possibilities of tariffs would preclude the need for inversions and may even entice some US businesses to bring production of goods intended for the US market back to the US. I just heard a fellow on TV estimate that a 15% corporate tax rate could boost S&P 500 earnings growth by 18% all by itself, think about that for a minute.
Today's action was very positive in my opinion and just may be the signal I've been waiting for. The indices are making a strong bounce from support levels near/at long term trend lines, supported by economic trends and earnings outlook with the very real possibility Trump could unlock the economy and unleash growth. I'm still cautious but it's time for me to start nibbling when the opportunities present themselves.
Until then, remember the trend!