Market Briefing For Thursday, November 10

The overnight panic and ensuing recovery dispel the short-term fears a bit but also do enhance the prospects of a Fed rate hike and expectations of a rise in inflation (dispelling the stagflation) over the course of time. Very clearly you now will have a new comfort level that business is not at war with Government, and a very interesting approach to asset allocation.

To wit: a good prospect for the Nation's recovery initially can still be not so hot for the markets because of the coming impact on credit markets as a triggering mechanism. So you get an improving economy and heavy stock market, concurrently, because the equity levels are so absurdly high. At the same time the strength in Oil and some infrastructure-related stocks, is part of why the S&P held together on this first post-Election session.

The outlook for the economy and markets must separate itself from concern on the social level (which we have less of than so many, as laws don't get repealed so quickly, and believe that to a degree Trump spoke to his base in some sectors, does not and never planned to govern as a wild wacko).

We have 'a chance' for our economy to come out of the doldrums over the next couple years (not months). The market is telling you it sees relief, yet soon it will grapple with the Fed or other changes related to excess price that remains in the Indexes. At least people will feel less of the mood that the Government is fighting rather than working with American business.

Daily action hints of the building of an economic consensus in the works and we look forward to the broader society realizing how that's going to be beneficial for their future too over time. Incentivizing initiative, not dependency on government, is why this is a key moment for the USA.

Incidentally the 'polls' were not so wrong if you listened to the neutrally or not so 'scientifically skewed' ones; thus the Real Clear Politics or USC / LA Times / IBD polls; that I share for the last couple weeks showing how Trump was actually likely in the lead. Not the popular vote, but maybe in the areas it counted. Plus the 'stealth' vote of Democrats who were very less inspired than when Obama ran, and quietly crossed party lines; as in the status quo they didn't see their lives improving. So this isn't so much a Republican victory (as Trump isn't a traditional Republican); it's not even a Trump victory (because many voted for him as a vote against alternatives) in some senses, so maybe it's a victory against globalism, against elitism, against monetarism and for rebuilding the US in more substantive ways.

You also likely will see an amelioration of the global tensions, provided the Russian leader (in particular) doesn't see this as a path to harass Europe but is more interested in the removal of sanctions that so-damaged them. If that's the case, Putin won't be moving against the Baltic states; will find a way to work with us better in the Middle East, and reduce pressures on our Defense Budgets, and I mean ratchet it down in both countries. That's not to say don't modernize, it is to say don't mobilize.

Expecting the session to hold on through the day (starting with the first comment as it was already evident the S&P turned at night), we avoided fading the market until midday; caught two small gains at best and did one more effort in the final hour based on the guideline to fade on a 2-point trailing sell-stop 'if' we got above 2164. Well we briefly shot over 2166, so that gave us a short-sale from 2164. The idea was if it got down to 2159 (a 5 handle gain) we'd take partial profits and hold part overnight; so that's where we are now; partially short from 2164 with breakeven for that balance. For traders we'll review it again in the morning.    

Thursday's pattern could see an early dip 'if' Asia and Europe (soaring we suspect, early) have faded by the time the NYSE opens. Hard to say. We do point out the selective rotation nature of the market advance. Probably it's almost a massive panic and relief (Brexit style) compressed into one day or slightly more (faster and dramatic, Yankee style); with contractions later. I'm feeling very optimistic about the business future down the road, but that means higher interest rates and a price to be paid. Initially that is a not-unseen shift from Treasuries into equities; but it's oversimplification. I suspect this phase is of limited duration.