US stocks surged sharply overnight as reactions to Donald Trump's win as president. DJIA rose 256.95 pts, or 1.4%, to close at 18589.69, just missing record close of 18636.05. S&P 500 also rose 23.7 pts, or 1.11%, to close at 2163.26. That was a strong reversal in sentiments after the initial knee-jerk reactions considering DOW futures once plunged as much as -800 pts. Rally in stocks were led by financial, health-care and industrial as markets bet on Trump's policies. In particular, his mentioning of Keynesian style spending was seen by the markets as an act to reset investor expectations. Meanwhile, the move in stock was accompanied by selloff in long dated bonds on expectation of more spending and more debt. 10 year yield closed strongly at 2.072, up 0.21 from prior day's close at 1.862.
Technically, the rise in DJIA put it back into the long term up trend and new historical high should be seen, probably today. However, from a larger perspective, rise from 15450.56 could be the fifth wave in the long term up trend from 2009 low at 6469.95. If such rise is unfolding as a terminal triangle, strong resistance would likely be see around 61.8% projection of 17063.08 to 18668.43 from 17883.56 at 18875.66 to bring a rather sharp reversal. Hence, while the near term outlook is bullish, we'd be very cautious on the reaction from 18875.66. Though, powering through this projection level will remove this concern and should send the index through 20000 handle to 61.8% projection of 10404.49 to 18351.36 from 15450.56 at 20367.72 in medium term. And that would be dollar supportive and should be accompanied by an upside breakout in the dollar index.
As of yesterday, markets are pricing in 81.1% chance of rate hike by Fed in December, up from prior day's 76.3%. According to a Reuters poll, 85% of 62 respondents expected Fed to continue with the rate hike in December despite Trump's shock win. Chicago Fed president Charles Evans said earlier this week that only a "pretty sizeable" negative surprise could prompt Fed to hold fire again. Markets will listen to St. Louis Fed president James Bullard's comments today. Technically, the dollar index is back in the near term rise from 91.91 and break of 99.11 should be seen. We maintain that rise from 91.91 is corrective looking so far and it's probably part of the consolidation pattern from 100.39. Hence, we'd be cautious on strong resistance below 100.39 to bring reversal. However, there is chance that dollar index would follow stocks and yields to accelerate upwards. And, a strong break of 100.39 will confirm long term up trend resumption finally.
Elsewhere, RBNZ cut OCR by 25bps to 1.75% as widely expected. Australia consumer inflation expectations dropped to 3.2% in November. Australia home loans rose 1.6% in September. Japan machine orders dropped -3.3% mom in September. UK RICS house price balance rose to 23 in October. Canada will release new housing price index later today. US will release jobless claims.