Markets Dive To 100 Day Support, Any Bets?

November 7th, 2012
in Gary's blogging

Opening Market Commentary For 11-07-2012

The premarket took a dive after it became clear that Obama won his second term. A feeling going around Wall Street economists is now the possibility of discord in avoiding the 'Financial Cliff' that awaits the US on January first is a real worry and the outcome is in serious doubt.

The SP500 was off 20 points from its high yesterday as we approached the opening bell. Traders obviously are considering the seriousness of the EU's financial issues and a now possibility of a contracting business atmosphere in the US reigns high. Now that the election is over we move on to the next problems of Greece and the gigantic 'Financial Cliff' in the United States.

The markets opened down, seriously down, on what is 'relatively' high red volume. By 10 am the markets paused after diving to lows seen in the last 10 sessions. Anyone care to bet which direction the markets are going to go next?

Follow up:

What is going to happen next in the gyrations of the US stock market is going to be interesting. I really didn't expect the markets to take a nose dive if Obama was reelected, but that is exactly what appears to have happened.

Most of the averages are hovering near a support on or near the 100 day MA. If that support is 'solidly' broken I suspect we will see lower numbers on the averages. As of 10 am the averages are hovering at the support mentioned above. By 10:15 many of the averages slid below that support zone.

There will be many articles both pro and con regarding the US elections in the coming days. Now the real drama starts.


Goldman's Post-Mortem: "Congratulations Mr. President, We Are Cutting Q4 GDP To 1.5%"

Congratulations on the four more years, Mr. President. To celebrate, Goldman starts by cutting the Q4 GDP forecast from 1.9% to 1.5% (and let's not forget that the same Goldman is predicting a 15% drop in the S&P in the next two months to get the Fiscal Cliff deadlock to break).

And another thought even though they do not mention what the 'good' stocks are.


What Stocks Do After Elections

There is no discernible post-election pattern here; we've seen everything from big booms to sizable corrections. And there's little correlation between market performance six months or a year after presidents take office and performance over the course of their administrations. Stocks did poorly soon after president Ford took office, but they did remarkably well later in his term. The same goes for president Reagan.

So keep in mind this week that:

  • You should want to own good businesses.

  • You should want to hold them for a long time.

  • You should want to buy them at great prices.

  • None of those three should be materially influenced by who wins the election.

In other words, buy companies -- not politics.

The RRR** was very narrow at the opening bell, just as it has been for the past month. Any trades today will probably end up on the unprofitable side as long as this market remains flat or continues to have low volume. Today would have been a good setup for some shorts, but to have gotten in you would have to 'guess' yesterday what was going to happen today. I suspected we would have a somewhat down day if Obama was reelected, but wasn't willing to gamble.

I have issues with some traders in that they are saying there are setups for day trading. This is true enough, but the trading range is so narrow that way too money has to be put on the table just to get back meager gains. The real gains are guessing at the overnight holds.

Swing trading is also at your own risk and being the market is at a crossroads of sorts, I would prefer to sit on my hands rather than risk guessing incorrectly as the markets are currently untradable. Guessing where the market is going to be tomorrow or next week, at this time anyway, is a foolish endeavor.

The DOW at 10:15 is at 13026 down 218 or -1.64%.

The 500 is at 1405 down 23 or -1.61%.

The $RUT is at 811.31 down 14.50 or -1.76%.

SPY is at 140.76 down 2.19 or -1.52%.

The longer trend is up, the past week's trend is bearish and the current bias is down.

How Oil Really Gets Priced

WTI oil was down today and is at 46.46 trading between 88.80 and 86.19 and the bias is negative.

Brent crude was down today and is at 109.14 trading between 111.60 and 108.80 and the bias is negative.

Gold is up this morning. Currently trading down at 1719.04, trading range is between 1705.44 and 1730.00 with a neutral to bearish bias.

Dr. Copper is at 3.44 down from 3.54 earlier. (Ouch!)

The US dollar rose from 80.37 earlier to 81.02 and is currently trading at 80.90.


Why Wall Street hates Obama

"There's been so much finger pointing. He's made it seem bad to be successful and to be millionaires and billionaires," said Karl Wellne . . . "There's the idea that if you're successful you didn't do that on your own," said Sander Gerber, CEO of hedge fund Hudson Bay Capital Management. "Romney believes that individuals' drive and willingness to work hard is what makes them successful." And that's a theme that resonates on Wall Street.

Congress passed the Dodd-Frank Act on financial reform in 2010, but many of the rules still need to be written.

"Obama would give carte blanche to heavy-handed regulators and just say go for it," said Wellner.

. . . Obama's rival has made it clear that he is in favor of regulating banks. Romney's main objection to Dodd-Frank is that it gives big banks the implicit guarantee of further bailouts.

"Romney looks at things more analytically," said Wellner. "He's more of a consensus builder. The president is dogmatic, it's his way or no way."

** RRR = Risk Reward Ratio

To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

Written by Gary

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