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Pre-election action was bullish... is sell the news next, or not?

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Stocks didn't open all that strongly but as the day went on we saw some upside follow-through to the big Monday rally. The Dow ended the day up 73-points, which was a solid daily return, but that was just half of the early 140-point gain we saw at the peak, so investors weren't 100% confident holding into the close before the election results were announced.


Daily TSP Funds Return

I am writing this early Tuesday evening so I don't have any idea how the election went. I may or may not update this once the results are announced - it depends if there are any surprises in futures market reaction. The futures did just reopen and the S&P futures are floating between a 3 to 7-point early gain and that's without any results as far as I know. That is bound to swing as the election results come in.


Of course I have no idea how it will play out, but we're pretty sure a Trump victory will push stocks lower, at least initially. A Clinton win could trigger an early rally, but I still wouldn't rule out a "sell the news" reaction before the close on Wednesday or into Thursday. The reason is that a Clinton win may have already been priced in and at that point we could see some profit taking.

Anyway, here's a chart of the SPY (S&P 500) of the last 3 elections 2012, 2008, and 2004. The recent two saw some significant pullbacks after the election, but in 2004 stocks rallied sharply all the way through December.






2004 was the last election that a republican won, but that is probably not significant. We know the market probably won't like a Trump victory based on what we have seen in the market leading up to Election Day.



Update: The unexpected seems to have happen and they are calling the election for Trump. The futures are down sharply but off their worst levels. The S&P futures had been down well over 100-point and right now they are down 65 as I write this at 2:45 AM ET. It could be a very volatile day.


Per www.tsp.gov:
"Some financial markets will be closed on Friday, November 11th in observance of the Veterans Day holiday. The Thrift Savings Plan will also be closed. Transactions that would have been processed Friday night (November 11th) will be processed Monday night (November 14th), at Monday's closing share prices."


The SPY (S&P 500 / C-Fund) followed through on Monday's rally adding another 0.41%. The lower end of the descending channel held late last week and here we are nearing the top of the channel again. It closed above the 50-day EMA, which is a good sign, but as we saw back on October 24th, we can't always trust the first close above it.




The DWCPF (S-fund) added 0.31% and there is some pesky resistance in the 1056 area where the 20-day EMA meets the September and October lows. Sometimes the breakdown point becomes the resistance on the way back up. The 50-day EMA and a descending resistance line meet near 1066.




The Dow Transportation Index was down over 2% in early trading on Tuesday, jeopardizing the breakout on Monday. But it found its footing and rallied to get back that 2% loss and close at break even. Break even was relative weakness compared to the rest the market, but none the less, it was a big reversal day.




The EFA (I-fund) rallied back up to the 200-day EMA and some descending resistance. Interesting juncture here. Strength in the dollar has hurt the I-fund this week.




The High Yield Corporate Bond Fund was down slightly in front of the election after gapping up on Monday. It has closed back above the 50-day EMA for a 2nd day, which is good, but there's some possible resistance at Monday's high. As always, open gaps are a threat to be closed.




The AGG (Bonds / F-fund) was down again and looks bearish but could get a bounce on any volatile election-driven stock market action.




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Thanks for reading. We'll see you back here tomorrow.

Tom Crowley


Posted daily at www.tsptalk.com/comments.php


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S&P500 (C Fund) (delayed)

(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)

(Stockcharts.com Real-time)
EFA (I Fund) (delayed)

(Stockcharts.com Real-time)
BND (F Fund) (delayed)

(Stockcharts.com Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes