The Post Election US Stock Market is “Amazing”

The Post Election US Stock Market is “Amazing”

The Post Election US Stock Market is “Amazing”

$DIA, $SPY, $QQQ, $VXX

The post-election US stock market action is intent on rallying to the new highs daily, such moves are typically associated with rapid economic growth.

But, so far we have not seen any new data that supports that, except for Consumer Confidence, aka optimism, hitting its highest marks since before the financial crisis.

The Big Q: What is Wall Street seeing this Christmas Holiday Season?

The Big A: Good Cheer, what might have been called The Santa Claus Rally, is really The Trump Rally as the Obama Era is over.

The market is looking ahead to a rosy future, and in this case the reasons outside the official government statistics.

The Trump Rally is mostly psychological in here, as new information comes to light that should be good for jobs and business conditions.

Market psychology is Key to understanding where things are in terms of the market cycle.

When participants are negative, stocks tend to go down most of the time. When participants are positive, they go up.

When people are Neutral, as they have been most of the past 8 years, there may be long periods with no discernable trend whatsoever, and a sideways market develops.

Today’s Trump Rally indicates tomorrow’s expectation of faster economic and corporate profit growth.

There are a few reasons why.

  1. There’s the job front. While headline unemployment looks great at 4.9% as of October, that number leaves a lot to be desired. It excludes 94-M Americans from the workforce, and many of those are people who have lost their jobs, used up all their unemployment benefits and haven’t been able to find a new means of employment. That number is reflected in the labor force participation rate. This rate is 62.7% of the total workforce population, down from 66% a decade ago. Today’s rate is the lowest level since the 1970’s, when women were rapidly entering the workplace. In short, more than 1 in 3 people who are prime candidates for working are not working. That number represents millions of job hunters currently laid idle. With a Trump Administration focused on American  jobs 1st, a rising participation rate will be a Key criteria instead of headline unemployment numbers. So, if  this market rally is to continue, we will want to see that participation rate rise in the future. As it does so, expect stocks to rise.
  2. We are seeing how the incoming Trump Administration will handle taxes and regulations. On the campaign trail, Donald Trump admonished several companies, including air conditioner manufacturer Carrier, a unit of defense contractor United Technologies (NYSE:UTX), for their decision to close up shop in the United States and relocate to Mexico. The biggest problems with remaining in the United States involved taxation and regulation. The President Elect’s team already worked with Carrier to keep the plant open by offering tax credits in the State of Indiana. While Carrier’s taxes will be lower at the business level, they will be employing 1,100 people who will continue paying their taxes rather than drawing out unemployment benefits. It is still a net benefit to the government, and the left wing news media CNN and MSNBC are not talking about this issue. The deal sounds like a Win-Win. It is also a new record: a President fulfilling a campaign promise before even taking the oath of office.

We can expect these deals to unfold more uniformly once the Trump Administration takes office. With a focus on cutting taxes, a Republican tradition, the incoming team also promises cutting regulation as well.

With Red Tape cutting, many of the hidden costs on businesses above and beyond taxes if they are successful will fall by the wayside.

Reducing the Red Tape allows government to act more business-friendly without acting more business-like. And if prosperity improves, government will benefit from higher tax revenues, even if tax rates go lower.

It is Win-Win.

The post-election cheer in the stock market is genuine.

Thursday, the major US stock market indexes finished at: DJIA +65.19 at 19614.81, NAS Comp +23.59 at 5417.35, S&P 500 +4.84 at 2246.19

Volume: Trade on the NYSE came in just below 1-B/shares.

  • Russell 2000 +22.6% YTD
  • DJIA +12.6% YTD
  • S&P 500 +9.9% YTD
  • NAS Comp +8.2% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Very Bullish (0.52) Bullish (0.48) Very Bullish (0.60) Bullish (0.47)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.30) Bullish (0.29) Bullish (0.42) Neutral (0.19)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Very Bullish (0.52) Bullish (0.47) Bullish (0.40) Very Bullish (0.69)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.47) Very Bearish (-0.50) Bearish (-0.44) Bearish (-0.46)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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