Post-Election Market Analysis
I had the good fortune to be a panelist in
TheStreet
's live election night blog, where a lot of interesting hypotheses were put forth on the economy and financial markets as election results were reported.
The election is over, and so is the
Fed
news for now. Where does that leave us as far as the markets are concerned and what, if any market surprises, have I seen so far? The answer is no real surprises, but we do have some observations. With one post-election trading day under our belts -- we see the following:
First, the stock indices: Participants on the Blog were divided as to whether stocks would rally immediately, or decline as the Republicans took the House of Representatives. Our belief remains that the market is ripe for a pullback and this election news could be the catalyst. The SPY (SPDR S&P 500 Trust) traded sharply above the key 120 area we have been mentioning.
We have a couple of observations: First, and most important -- the 5/20 moving averages we use remain positive on both daily and weekly charts, so the underlying trend is still up.
However, indicators are overbought.
Normally with this indicator configuration, a sharp decline ensues, followed by more upside, and that is what we still expect -- unless we start to see successive CLOSES above the 120 area on the SPY. Today would be the successive close day.
Our concern is that false breakouts can occur from this indicator configuration as well, and traders may see a better entry. We remain intermediate-term bullish. Should this occur investors should add to equities.
Second, Bonds are interesting and the TLT (Barclays 20 Year Treasury Bond iShare) had a sharp reversal and an outside day down. We have been forecasting a test of the 96 area, and still are, although I confess to thinking there might be more upside than mentioned in our Newsletter (
). Still, 102 (as mentioned) did serve as resistance and this market looks lower, to challenge the 96 area. I would wait on buying bonds, and would look at Corporates instead of Treasuries. We also note that the HYG (High Yield Corporate Bond iShare) has continued up, not down, suggesting stocks should rally. We show five-, 10- and 30-year rates so you can see where the action is in the longer durations.
We think stocks will outperform bonds into the end of the year.
Last, gold has had some wild days, but closed well on Thursday. A pullback in the metals is possible, but we continue to believe this is a strong bull market.
Advisors should have normal weighted positions in metals
. The DBC, and USO are also rallying and we have no opinion changes here either. These markets look intermediate-term up, whether now or after a correction.
We remain long-term commodity bulls.
Fred Meissner is founder and publisher of
. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report. A detailed bio is here:
.
