Hillary Win Bad For Trading – Trump Win Good For Trading

November 7, 2016
Author: Peter Stolcers, Founder of OneOption

Posted 9:30 AM ET - Two more days and we will get a break from all of this mudslinging. The last year has been brutal and we will know the election results Wednesday morning. Polling booths should come equipped with a shower so that we can clean ourselves after we vote. This is a binary event and it will swing the market one way or the other. Last night we learned that the FBI did not find any additional incriminating evidence in the new e-mails. Latino voting in key states has been robust and that will help Hillary. In pre-open trading the S&P 500 is up 29 points. If Hillary wins the market will grind back into the middle of its trading range. She is a known commodity and her policies will keep the country moving in the same direction. Stable markets will pave the way for a December rate hike and traders will wait for that news. This scenario is not good for trading and we will muddle around in the range the rest of the year. There might be a wave of profit-taking in January and February like we saw last year. If Trump wins the election the market will decline and the 200-day moving average that was challenged Friday will fail. He is a virtual "unknown" and it's difficult to gauge how much he will be able to accomplish with opposition from both sides. A Trump win will increase activity and trading will be brisk. I believe a nice decline will set up an excellent buying opportunity and the Fed will postpone its rate hike. Earnings have been okay. Stocks are trading at a forward P/E of 17 and they are fully priced. Economic growth is improving (GDP, China's PMI, ISM services and ISM manufacturing) but job growth is still very soft (161,000). A dovish Fed is keeping buyers engaged at lower levels. As soon as the upper end of the trading range is challenged we see profit-taking. We are likely to see some position squaring today and tomorrow. I urge you to keep your overnights small. A Clinton victory is priced in and any surprise favors the downside. I will wait for a dip or a tight compression before I buy today. This bounce seems like an over-reaction. If you look at a chart of the SPY you will notice a series of red candles. This indicates that the market opens on its high and closes on its low (bearish pattern). I suspect that we will see a light round of selling today. The SPY bounced off of the 200-day moving average and that is support. We have resistance at the 100-day moving average and we can use these levels as our guide. Be patient on your day trades today. If the rally stalls, watch for late day selling. There might be an opportunity to get short this afternoon. . . image

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