Why Was The Market Down On Obama Win?

Why did the Dow drop more than 5% on a landslide Obama win? Wasn't the Obama win one that won the hearts of men? Well, the answer is simple. The effect of the win (Obama or otherwise) has already been priced into the market over the past 4 trading days as the Dow gained against dismal economic numbers. As the textbook behavior goes, whenever good news gets priced in too early, the market drops when the good event eventually happens due to profit taking. On the other hand, democratic wins have never been as much a boost for the stock market as a republican win.

The market looks like its ready for that final capitulation that I spoke of over the past week but don't be surprised to see the market actually go sideways or pullup a little over the rest of the week as such huge drops usually lead to a few days of slight accumulation. The next big thing for the market this week would be Friday's Jobs Report (see economic calendar), which is most likely going to see unemployment rate hit a new high. Could that be the catalyst needed for that final capitulation?