Stocks dropped again and that's 8 days in a row for the S&P 500. The Dow lost "just" 29-points, or 0.16%, but the broader indices lagged showing the broad weakness. The closer we get to the election, the more anxiety seems to be rising. Will we see a "buy the news" reaction after the election, or will the chaos just be beginning?
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This election cycle has been one for the ages. Wall Street is getting a little panicky as Trump, a complete unknown as far as setting economic policy goes, has erased Clinton's big lead in the polls, and a possible Trump victory is starting to get priced in.
On the other hand, if Clinton wins the election, there are multiple FBI investigations open and indictments are not out of the question. What would that mean for the presidency? The economy? The markets?
So these are the questions that Wall Street are asking, and their answer right now seems to be, don't buy until we know more. Of course when Joe and Jane Sixpack see stocks falling, they jump on the bandwagon and start selling too. The problem for them often is, when they are done selling, there's no one left to sell and because of that stocks could easily rebound without them. So it's a tough call for everybody.
So how about this seasonality shakeup? This market is fighting against them all. November is supposed to start the stronger 6-month period of the year. Buzz! The first 5 days in November are supposed to be strong. Buzz! November is supposed to be exceptionally strong during election years. Buzz! So this year is clearly an anomaly and surprisingly those who have made what seemed like an obvious call, which is usually the kiss of death in market timing, to stay out of stocks until after the election, have been right so far. Is this going to be a case of "sell the rumor, buy the news" after the election? The economy? The markets?
The October Jobs Report comes out on Friday morning and the consensus estimates are looking for a gain of about 175,000 and an unemployment rate of 4.9%. The Jobs Report Contest winner will be announced here in the forum.
The S&P 500 (C-Fund) fell for an 8th straight day which is the longest streak in quite some time. It was down 7 of 8 days last fall but nothing this long in 8 years. The 200-day EMA was taken out earlier in the week and now it is testing the 200 simple moving average, which some people use, and something I will address when it is in play. The index is now testing the lower end of the new downtrend so perhaps a relief rally is due, but again because of the election being three trading days away, the uncertainty continues.
The DWCPF (S-fund) has closed for a 3rd straight day below the 200-day EMA, matching the number of days it closed below it after the Brexit vote.
The Dow Transportation Index had broken out again above a cup and handle formation intraday on Thursday, but once again closed back in the handle. A breakout would be a very good positive divergence for stocks, but nothing to report yet.
The EFA (I-fund) was down just slightly because the dollar has also been falling for the last 5-days. There are a couple of gaps that may be in play now should stocks not reverse any time soon.
The price of oil has fallen below more key support and may be on it's way to the bottom of its $40 - $50 range.
The AGG (Bonds / F-fund) was down after having filled the overhead open gap on Wednesday. The head and shoulder pattern is still intact and an initial rough downside target estimate would be in the neighborhood of 110.50.
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Thanks for reading. Have a great weekend!
Tom Crowley
Posted daily at www.tsptalk.com/comments.php
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