Enis’s Macro Wrap – Election Day

by Enis November 6, 2012 7:16 am • Commentary

I came across an interesting analysis of market action after the last 3 presidential elections.  The entire post at the AfraidtoTrade blog is a good read, but here is the concluding excerpt:

The past three elections reveal a “spit decision” of two sell-off outcomes (into December) and one sharp rally outcome (2004).

Here is how the market structure exists as we approach Election Day 2012:

While I don’t plan to make a formal prediction on the state of the election, I’ll just focus on the current structure of the market at a short-term turning point between a new pro-trend upswing off 1,400 or else a breakdown and short-term reversal swing under 1,400.

Polls and pundits suggest an a narrow win for either candidate and the potential that the outcome is unlikely to be known as soon as the polls close on election evening.

In the event that the election results are in dispute into the next trading morning, this outcome would favor the “Breakdown” thesis where 1,400 may break as support.

Otherwise, just because a winner is declared does not mean the market will automatically rally in a knee-jerk reaction (reference 2008).

As you wake up ready to trade the market on Wednesday morning, feel free to use these historical charts as a reference with respect to the key “bull/bear” pivot level near 1,400 currently in play.


Enis here.  I tend to agree that 1400 is the key level.  It has behaved as support for 2 weeks now (and coincides with psychological support of 13,000 on the DOW Industrials too), and many bets have been placed around that level.  An interesting week awaits.

Markets overnight:

  • Asia was mixed, with Japan, Hong Kong, and China lower, but Taiwan, India, and South Korea higher
  • Risk-on price action took over after the European open, and Europe is trading up 0.75%, with SPX futures up 0.3%.
  • The dollar and Treasuries are broadly lower, and commodities are almost all higher.  The Aussie dollar was particularly strong after the central bank left rates unchanged.
  • The Greek parliament votes on more austerity tomorrow and Sunday, and unions in Greece have started a 48 hour strike to protest the bill.  They seem to always find the votes, so the real news would be if the bill failed for once.