The only sport bloodier than the MMA Octagon is politics. And it’s more entertaining!
I don’t know what happened election night yet, as I’m writing from Charleston, SC at roughly 3pm ET Tuesday. And I don’t know where stocks will finish ahead of the rising blood moon and closing midterm polls.

Photo 168255826 / Elections © Joaquin Corbalan | Dreamstime.com
But I do know where the market data are ahead of the outcome. On Nov 8, 2016, Broad Sentiment, our scaled 10-point algorithm metering buying and selling by traders and investors, had bottomed near 3.6.
A reading below 4.0 is a strong entry point. And the market was off to races on the Trump victory.
At Nov 8, 2022, Broad Sentiment is 8.0 and leaking down from 8.2, just the fifth “eight handle” in the whole data set we use, back to July 2017. It’s been a furious momentum market already. Before the election. Not after, as happened in 2016.
And Short Volume, the supply side of the stock market, is 48% of trading volume in the S&P 500. That’s what the stock market has averaged in 2022, a tough year for stocks.
And if you’re shocked that nearly half the volume is borrowed, don’t be. It’s long been over 40% but 2022 is the highest average we’ve seen since the data set began in 2010.
So whatever happens to stocks into the close today, and tomorrow, Broad Sentiment is peaked, not bottomed.
Forget whether you give credence to our metric, and don’t worry about its construction. Here’s a fact: Since the Growth Market ended in Nov a year ago (the data say it died in May 2021 but follow me here) – that is, Big Tech stopped powering it – the market declines about 4% over the proceeding 2-4 weeks whenever Broad Sentiment tops 6.0.
Doesn’t mean the market won’t soar if emotional people giddy about midterm outcomes goose equities. But it suggests if the math holds that some weeks out it’ll be down 4%.
On Nov 6, 2018, Broad Sentiment was rallying strongly, topping 6.4 Nov 7. But it peaked by Nov 12. Stocks then fell. On Nov 4, 2020, Broad Sentiment was bottomed around 3.2, an entry point. Momentum exploded, Broad Sentiment shot over 8.0 by mid-month, and stocks rallied.
Let me explain that eight-handle thing.
I said the stock market topped 8.0 only five times the last five years. Three of those were during the 2020 Pandemic Mania when people were blowing Covid checks on meme stocks (the last one was Nov 2020). Artificial money lights momentum fires (that burn out worse than they flamed).
One came in Jan 2019 when the Federal Reserve, under pressure from the Trump administration for killing the stock market, stopped shrinking its balance sheet. The dollar weakened, and stocks raced off anew until Feb 2020.
This fifth one is unique because it doesn’t fit with the others. It comes with the Federal Reserve grimly putting the screws to interest rates.
Momentum happens when too much money chases too few goods. That condition, by the way, is measurable in your stock too.
So, what is it? Well, it could be the recent rally – especially in blue chips because Big Tech sure isn’t rallying – is an election rally already. It’s as though the market baked in an outcome in October.
If so, it may mean the market behaves differently in the aftermath of what might be a meaningful shift in the federal balance of power.
And maybe that’s wrong and we’re back to a momentum market.
But I don’t think so.
I think the Federal Reserve needs rates back over 3% not to tame inflation but to be able to cut them to 0% again if the economy starts to unravel.
Foregone conclusion? Not at all. But the stocks of the Pandemic Mania have returned to earth and then some. It’s not unseemly to suppose an economy that was similarly juiced might do the same thing.
So maybe I’ve got it wrong. The blood sport is monetary policy. It’s like Commodus staging reenactments in the Roman Colosseum for weeks on end with real, dying gladiators. It was meant to alter people’s behavior, steer their mounting unease away.
And will we learn to leave rates high and let things fail so we don’t have manias and flameouts? Nope. No matter who runs Washington DC.
But if you can get past the blood, it’s all pretty sporting.