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Waiting on the election results

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Stocks had another wild ride on Tuesday with the futures pointing lower just before the opening bell, then we saw a strong open, an afternoon fade that took all of the early gains away, followed by another late rally into the close to end the day near the highs. It was quite interesting to watch. The Dow gained 173-points on the day with 0.6% gains in many of the indices, while small caps lagged a bit but gained almost a half of a percent. The Transports led with a 1% gain.

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If the market was concerned about the election then it hasn't shown it over the last week. But I am writing this Tuesday evening before any results have come in and it is probably useless to speculate on anything. The late spike may have had something to do with the reaction to stocks after the 2016 election.

If you remember 2016 when stocks were falling heading into the Election, and then late on Election Night, when it first looked like Donald Trump was going to win, the Dow overnight futures were down over 1000-points. It looked like we were going to crash on that next Wednesday morning. But by the time the market opened Wednesday morning, everything had reversed and we actually saw a big gap up opening and a relentless rally ensued. So just when you think you know what will happen...



By the way, it may be coincidence, but notice where the S&P 500 hit a low on the days before the election in 2016 -- right at the 200-day Simple Moving Average and just below the 200-day EMA -- just before the rally.

Where did it close yesterday? Basically right on the 200-day EMA and just below the 200-day SMA.




Big moves in either direction will impact the indicators that I watch so I'll make this short today, post a couple of charts, but I am going to watch the results of the election and see how the market reacts on Wednesday before trying to draw any conclusions.



The S&P 500 / C-fund looks like it wants to go higher, but that 200-day moving average and the open gap can get in the way. If they weren't there this would look a lot better. At this point, with an emotional election to feed on, we may see another gap up and go, or the 200-day average will hold and it will flop back over. My guess is a major sell-off that tests the lows may set up a good buying opportunity, and in the other side any major rally off the election could set up a good selling opportunity. I have my theories and at this point can only hope I am positioned correctly.




The chart of the tech heavy Nasdaq 100, which is basically run by those FAANG stocks, is also at a crossroads, dancing just under those important 200-day moving averages. We have some possible bull flags like this on several charts, but also the open gaps and moving averages so it's tough to say.




The AGG (bonds / F-fund) was fairly flat but the 10-year Treasury yield is getting close to 3.25% again making bond prices heavy.




That's all I am going to throw at you today while the market decides which way it wants to play the election results.

Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to: www.tsptalk.com/plus.php


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

Tom Crowley



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

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