Stocks fall back after election day rally

Stock indexes fell sharply today, the day after the election. It seemed likely that there would be some sort of relief rally as the election was concluding. I guess it would have been too logical to expect the rally after the results of the election were known. Instead the markets rallied on the day of the election. The Intrade futures market on the election outcome had McCain at less then $9 and Obama over $90, which were much more extreme than any of the polls, so the election results were to be expected. Today seems to be a bit of a hangover from the historic election.
You can see on the Nasdaq 100 etf chart how the downtrend is still intact. (Other stock indexes has similar charts.) The momentum indicator did have some divergence at the double bottom, indicating a likely rally. Now momentum is overbought and turning back to the downside, in the direction of the trend. The other side of the coin is that momentum did reach a new recent high after the divergence, which could indicate that the pullback may be shallow. The moving average lines are coming together, and could easily cross back to the upside if the pullback stalls out and goes sideways for a bit of time. If the pullback doesn’t go too far it is possible a low is in place. It is difficult to make a stand here, when the market swings hundreds of points back and forth from day to day. It does feel like downside momentum is waning. Also, after such a large downmove in October, it would seem likely there would be some sort of rebound into a seasonally strong time frame. But this seasonal upward tendency often fails to materialize, and trend and momentum are still down. Until there is more evidence of trend change, I’ll still cautiously give the odds to the short side.