TSP Talk Blog

The action of the stock market over the period of about 17 hours from 7 PM ET on Tuesday when the polls started closing, until the stock market closed at 4 PM the next day was stunning. I don't care if you were in stocks or out, if you were watching you had moments of both terror and delight as it was one of the more emotional market moves I have seen in a while. I'll say it again... Stunning!... Given the circumstances and what was thought to be conventional wisdom if Trump had won.

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The futures started to rally about 7 PM ET when the early results came in. The Dow futures were up over 200-points when Hillary Clinton took some early leads in the polls. But as the races tightened up and Donald Trump started to get the edge, things went south in a hurry. By about 10 PM the Dow futures were off over 800-points and and that held for a few hours until the race was actually called for Trump, when things started to get better.

And better they got. By the open the Dow started to show some signs of going positive, and of course by the close the Dow had gained 257-points or more than 1000-points off the overnight futures' lows. Gold, which was up over $60 an ounce overnight, which is a huge move, closed flat.

If you were in stocks, you had to be feeling a little sick seeing what was happening overnight. By the open you were OK. Those on the sidelines, who were probably happy to see those losses - possibly as an opportunity to buy low, missed out on a 1% to 3% gain. What a day!

The continued intraday rally was likely fueled by those who were on the sidelines that feared missing out on a market that had just recovered 800+ points in a few overnight hours. A "get me in at any cost" attitude.

The market has a habit of making the most people feel uncomfortable as possible and yesterday was one of those days. Almost every Wall Street pro was telling us that stocks would drop if Trump won. And they did... for a few hours.

Remember this that I said in Monday's commentary...

"I am seeing all kinds of predictions about the market falling should Trump win. Citi Bank predicts a quick 5% drop in stocks if Trump wins while Dave Stockman, "the father of Reaganomics", predicts a 25% drop no matter who wins. When I hear things like that I get very skeptical because investors had weeks to sell into the rumor of a Trump win, and they have, and we usually end up getting a "buy the news" reaction after the rumor is sold."

Well my skepticism turned out to be right, but I was one of those who decided to play it 'better safe than sorry'. But as I said, no matter where you were Tuesday, it was a heck of a 17-hours for you.

As far as analysis goes, it makes sense that financial did well since Trump was against keeping interest rates low. There were other industries that also benefited from the Trump over Clinton result like pharmaceuticals, but even small cap stocks excelled despite that group normally being negatively influenced by higher rates, so I know some of the action was emotion and it was a - buy first ask questions later - rally. But can it hold? The action didn't feel all that natural.

Per www.tsp.gov: "Some financial markets will be closed on Friday, November 11th in observance of the Veterans Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Friday night (November 11th) will be processed Monday night (November 14th), at Monday's closing share prices."


The SPY (S&P 500 / C-Fund) actually opened sharply lower on Tuesday but reversed quickly and it ran up close to the all-time highs. Volume was huge and that could mean a turning point or a blow-off top, but that tends to work better on sell-off days when stocks are bottoming as you see below in June and September. That small open gap from October got filled, but the big one down near 210 is still wide open.




That gap may or may not get filled and one reason I suspect that it's possible that it not, even though gaps almost always get filled, is that the S&P futures market did fill the gap overnight, and as you see it never did create an open gap in June like the SPY did above. So there's no gaps as far as the futures market is concerned. Still, a gap is a gap, I guess.




The DWCPF (S-fund) had a big 2% day but ran into a little resistance at the descending resistance line. That could just be a one day pause, but if the rally turns out to be an overly emotional exaggeration, then there's a chance it could run into some trouble here.




The Dow Transportation Index was up another 0.83% extending its recent breakout and leading the way higher.




The EFA (I-fund) was up only slightly as the dollar was up sharply but also because the Far East markets had already closed with huge losses before U.S. stocks started their massive comeback.




The High Yield Corporate Bonds are interesting. With yields rising this fund was down sharply after hitting some resistance and it tried to fill that open gap from last week. This may be one to watch as a possible sign that the rally in stocks was overdone. It's hard to say but that's the 2nd negative divergence day in a row compared to stocks.




The AGG (Bonds / F-fund) sold off as the prospects of higher rates are not good for the price of bonds. This chart was bearish to begin with so it was another excuse for folks to dump bonds.




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Thanks for reading. Have a great holiday weekend! Thank you to all of those who have served this great country!

Tom Crowley


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