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The S&P 500 Comes Full Circle Ahead of Presidential Election

The S&P 500 Comes Full Circle Ahead of Presidential Election

2016-11-08 11:11:00
Paul Robinson, Strategist

What’s inside:

  • The S&P 500 bounces from confluence of support, oversold conditions on FBI clearing Clinton (again)
  • We’ve come full circle ahead of the election since the new probe began/ended
  • Waiting on the outcome to decide what is what, no sense in taking risk ahead of it (levels noted)

In the last post, we were noting several lines of influence intersecting in the 2094/85 region along with the 200-day MA rising up from just a few short handles below. From Thursday’s piece,“even though consecutive down days, in and of itself, doesn't qualify as an oversold indicator, when we have a confluence of technical events close at hand it increases the odds we will see support act as a springboard.” After nine straight days of losses by the S&P 500, the longest streak since 1980, the combination of oversold conditions, significant support, and a bullish catalyst (FBI clearing Clinton) led to the 2%+ surge to start the week.

We’ve come full circle: The bulk of the recent decline starting late last month began on Friday, October 28 when the FBI said it was reinvestigating Clinton’s handling (or mishandling) of emails in light of new evidence. This sent the market reeling from about 2140 in the S&P, with it having already effectively priced in a Clinton victory given poll margins. Yesterday’s rally from Friday’s close at 2085 came after the FBI said on Sunday they found no reason to move forward with criminal charges against Clinton, sending the markets up big. The S&P 500 closed over 2131. Pretty much back to where we started.

Today is the election, and a lost trading day. It won’t be until early tomorrow morning GMT time we find out who the winner is, Clinton or Trump. It’s in Wednesday’s session we will see how the market feels about the outcome. (Join me tomorrow at 9 GMT for a look at price action following the results.) It looks as though a Clinton victory will be a positive, at least initially, whereas a Trump victory will likely lead to a sell-off, even if only short-lived. It also depends on how clear the results are; if they are extremely close, it won’t be surprising to see the results contested, especially if Clinton wins. If that is the case, it could be weeks before the winner is decided – a scenario which will keep the market on edge until we have a resolution.

In ‘wait-and-see’ mode. We see no point in placing any wagers at this juncture. This time, too, shall pass and we will move on to a more ‘normal’ trading environment where risk/reward will be more favorable.

Levels & lines to watch in the days ahead: Resistance lies not far ahead at the 10/10 upper parallel (~2137), the important 8/23 trend-line (~2152) which roughly coincides with the 10/24 high at 2155. An aggressive move above trend-line resistance will find the 9/22 to 10/10 period (~2170/2180). The first area of interest on the downside is in the 2115/20 vicinity, a zone which acted as solid support since September but presented little resistance yesterday. Below there, nothing substantial until the April lower parallel, lower parallel to the 8/23 trend-line, and the 200-day moving average. This cluster of support lies at ~2090 down to 2084.

S&P 500: Daily

The S&P 500 Comes Full Circle Ahead of Presidential Election

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