The economic data is thin this week until Thursday and Friday. The U.S. presidential election is tomorrow so markets are waiting for the answer. The media has already pronounced President Obama as the winner and has moved on to the fiscal cliff worries. The reality is that the contest will probably be a lot closer than anyone thinks. Some traders commented on how the markets dropped Friday due to the markets anticipating an Obama victory. Keystone wrote about the effects of the election on the markets a couple weeks ago (simply type "Presidential" into the search box above to review that information). If the president is reelected, then HCA, HMA, THC, CYH, LPNT, UNH, ISRG, CERN and MASI should all bounce. CI, AET and WLP should sell off. On Friday, it is a split decision with these stocks; six went the way as would be expected but six did not. The answer is that no one knows what is going to happen. But the early tell will be from the East Coast results tomorrow evening; watch Florida, North Carolina, Virginia, Pennsylvania and Ohio. If Romney takes Florida and Virginia as the results come in, then it is game on for a long evening. If Obama takes either Florida or Virginia to start the evening's results, Romney's hopes will be fading quickly. Keystone does not have a dog in this hunt, both candidtates are the same so it does not matter who wins, both are Keynesians that promote war, and the debates prohibited other candidates from participating.
An interesting concept on the polls (which slightly favor the president and is the basis for the majority of pundits proclaiming an Obama victory tomorrow), that no media analyst talks about, is that much of the polls are done thru contact via land lines. Think about it. The working professionals, typically republicans favoring Romney, use Smartphones these days and have long since abandoned a land line in their homes. The less well-to-do, however, and typically the democratically-leaning voters, many seniors, continue to display the land line on the kitchen wall or on the hutch in the hallway. The common sense thinking is that the polls would be heavily sampling democrats versus republicans and the flat to slight lead by Obama is actually reflective of Romney leading since perhaps two-thirds of the voters called are probably democrats and one-third republicans (Keystone pulls these numbers out of thin air). Further, the bluster that Obama has already won may cause democrats to simply sit home since everyone is saying it is already over. We will know if this hypothesis is correct, or not, tomorrow. Either the polls are correct and Obama squeaks out a win without too much effort, or, this hypothesis is correct, and Romney will squeak out the win and that will show early on with Romney winning Florida, North Carolina and Virginia. It is a circus now and will only reach a fevered pitch through the night into tomorrow. Strike up the caliope and bring the jugglers on stage to start the festivities. We are all part of the carnival whether you want to be, or not.
Back to the market technicals, something that makes far more sense. RTH 44.45 will tell you the market story today. Remember the dramatic Friday close with the retail sector stumbling lower tagging Keystone's RTH 44.44-44.46 target area? The bulls finished one penny above at 44.46, so as the bell rings, watch the reaction. If the RTH stays above 44.45 and heads higher today, the market bulls will rule the day. If RTH fails 44.45, the broad indexes will take another leg lower with the SPX moving into the low 1400's.
Note the euro weakness that we highlighted last week. Trader's may be sniffing out a rate cut by the ECB on early Thursday morning before the U.S. open. That would weaken the euro, and equities. Europe has no choice but to weaken the euro since they need to boost manufacturing and exports as a means to create growth to dig out of their debt mess. In addition, the BOJ is weakening the yen thru intervention which drives the dollar/yen pair higher, thus the dollar basket, $USD, higher, now well over 80, and the euro lower, since the dollar and euro move opposite each other. Pay attention to the following asset relationships this week that have been in place a long time; Euro down = dollar up = dollar/yen up = copper down = commodties down = gold down = equities down = Treasury price up yields down. And, visa versa, euro up = dollar down = dollar/yen down = copper up = commodities up = gold up = equities up = Treasury price down yields up. The euro is at 1.2779, falling under the psychological 1.28 this morning and now under the 200-day MA. Watch the 20-week MA support at 1.2646. The Germany 2-year yield slipped back into negative territory as traders seek safety. The U.S. 10-year yield is 1.68%.
SO missed on earnings so this should negatively impact the utilities sector. Watch the 50-week MA at 465.63 for UTIL which represents a trap-door for the broad indexes. If UTIL loses 465.63, it is very likely that the markets will drop into free fall in short order. UTIL begins at 469.78, only four points away from causing market catastrophe. Watch to see if the 8 MA stabs down thru the 34 MA on the SPX 30-minute chart since that would signal bearishness for the hours and days ahead. Watch Keystone's cyclical indicators such as the SPX 150-day MA slope and the UPS 20 and 50-week MA cross as highlighted this weekend. For the SPX today beginning at 1414, the bears only need one measley point, to drop under 1413, and this will accelerate the downside into the 1400's. The 1406 and 1403 levels are very strong support and if they fail, bad things will happen for the markets, SPX in the low 1390's would be a given for starters. The bulls have to stop the downward slide that began Friday and this is accomplished by preventing the SPX from falling under 1413 and the RTH from falling under 44.45. In a nutshell, RTH 44.45 and SPX 1413 tells you the broad market direction today. The futures are flat, S&P's dancing a point or two lower, but then moving a point or two higher. Dr. Copper remains ill and needs further medical attention.
For another perspective on the election:
ReplyDeletehttp://www.intrade.com/v4/misc/scoreboard/
John, the Intrade link has been in the lower right margin Links for the last few months. The President has been leading Romney about 65% to 35% for weeks now. The Intrade bets are tricky since if it should roll over for Romney, you will see Intrade flip very quickly and reverse, so watch that with a large grain of salt. They are both Keynesians.
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