Similar thing happened to me. The automatic tranny on this era of Ford has a ‘vacuum modulator’ that screws into the side of the tranny and attaches to a vacuum line. There is a diaphram inside the modulator that can rupture or leak, and when it does, the vacuum line then sucks transmission fluid into the engine, creating an epic cloud of white smoke; if you drove off a cliff, you could do skywriting on the way down!
It’s easy to fix. The aftermarket part is $30-40. Just screw the old one out and the new one in, attach vacuum line.