WASHINGTON, November 22, 2016 – This holiday-shortened trading week opened Monday with stocks resuming their irrationally exuberant Trump Rally, which could be the launch of 2016’s hoped-for Santa Claus Rally. Major averages have hit record territory and may set new records today.
It seems the more traders are seeing of Donald Trump and his still-evolving cabinet picks, the more they’re liking it, including Monday’s meeting with media bigwigs, execs and blow-dried Democrat operatives with bylines during which the New York Post at least claims the President-elect burned them all a new orifice. Or not, according to other reports. It’s hard to say, though, since the meeting was “off the record,” meaning whatever “news” is out there was leaked by somebody.
We also learned, via TrumpTwitter, that a meeting he’d scheduled with the New York Times Tuesday was abruptly canceled by The (President-elect) Donald due to a last-minute changeroo in the ground rules by the Gray Lady and her minions.
I cancelled today’s meeting with the failing @nytimes when the terms and conditions of the meeting were changed at the last moment. Not nice
— Donald J. Trump (@realDonaldTrump) November 22, 2016
Like accused perps in the police interrogation room on the standard Discovery ID episode, the Times promptly responded “We didn’t do it.” Again, pick your story. Given the Times’ history over the last roughly half-century, however, the Maven would tend to give a nod to the Trump version.
All this is having at least some spillover effect on stocks, but again it’s difficult to guess just how much. With a day off for the Thanksgiving holiday this Thursday, and with post-Thanksgiving Friday trading action typically weak to nonexistent in terms of volume, anything can happen, which it did on Monday—again on weak pre-holiday volume.
This lack of volume can exaggerate the effects of the dominant trade, as we saw in the week running up to the U.S. general election on November 8. Markets, which had been bullish up to a week or two prior to that day in anticipation of a Hillary Clinton victory and a continuation of the Obama Administration’s socialist and globalist normalcy, suddenly reversed course on lower, more cautious volume. Traders and investors were selling steadily, hitting all sectors without mercy and withdrawing money from securities rather than re-investing.
This cautious, relentless, nasty selling was perhaps our first “tell” that the pro-Hillary consensus might not be the way the electorate was moving. But the surprise came on Wednesday morning, November 9, when the predicted re-run of 1929 not only failed to take place. That scenario was entirely reversed, and stocks took off like there was no tomorrow as boring old bonds continued to be sold in mass quantities, driving interest rates up.
Some of this was clearly due to stocks’ extreme oversold condition. But as the sharp move upward gained momentum, it ignited a significant short squeeze as negative bets on the election outcome were blown out without mercy, meaning, of course, that buy orders simply increased by an order of magnitude.
Thankfully for the bulls, stocks took a breather last week, as techs, pharmaceuticals and some stocks in the oil patch took hits. But now it looks like Santa Claus is coming to town once again, with crude oil taking a tremendous jump Monday on more optimistic non-news reports of an upcoming OPEC oil production freeze or cut.
With Trump up to his political PR antics and with oil zooming back up from what looked like the beginning of another swoon, it didn’t take Monday’s low-volume rally much time at all to get bullish traders back into their happy places.
As of 2 p.m. EST, averages are once again modestly up, with the broad-based S&P 500 the weakest of the three majors, up barely 0.4 percent. Nothing to write home about, as the Great Thanksgiving Departure is already well underway.
We’ll be contributing columns only occasionally this week. Moves up and down during Thanksgiving week often have little long-term significance, given the lack of volume. Next week, early estimates of Black Friday retail sales figures—good or bad—may become more significant market drivers, although more pre-Inauguration Day hijinks, although likely last-minute fun and games played by the current lame duck president and negative OPEC news will also make their mark.
And then there’s that upcoming mid-December meeting of the Fed. Stay tuned.