A big run-up into the election results provided a classic sell-the-news setup, and that is exactly what happened. The results of the election didn't much matter. It was well anticipated, and when things played out according to expectations, it was time for market players to lock in some recent gains. The short-term technicals were overbought and the recent optimism a bit too giddy.
Once the selling started, it fed on itself. We began the day holding up well enough to encourage the bulls, but once the profit-taking kicked in, it was steady most of the day. Plenty of traders were looking for another late-day spike, and when it didn't happen, they rushed the exits and pushed us down even more. Once again it was a highly volatile final hour, which makes even the shortest-term trades a challenge.
The bulls have been looking toward rate cuts in Europe as being the next positive catalyst, but that seems very well anticipated also. If cuts take place overnight as expected, it may end up being another sell-the-news situation on strength.
Keep in mind we have jobs data coming up on Friday, and that is likely to receive some very close scrutiny. The market has been hoping all the bad news has been priced in, but I've been worried about the psychological impact when we see unemployment spiking up. We already know that sentiment is horrible, but unemployment numbers have not been that bad yet. If and when they do go higher, I'm concerned that the mood is going to be very grim.
This is one tough market so stay lean and mean. I keep saying its not the time to build longer-term positions, and I see no reason not to keep repeating that refrain.
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