I’m sure many of you are as happy as I am to have the election behind us. I recognize the importance to vote (I did!) and without the debates and advertisements then few people would have even the slightest clue who the candidates are. But it’s nice to have the focus shift from two men spending billions of dollars to tell lies about one another to…well really anything else.
Last Friday I wrote about what I was expecting to happen around the election in regards to equities. Now that the election is over and we know that Obama will have four more years in the White House, lets re-address this topic.
On Friday I said I expected the bulls to likely remain in control, taking us up to 1430-1460 but any rally we experienced would be short-lived. This seems to be what is playing out, with the S&P 500 hitting resistance at its 50-day moving average (orange line in chart below) right around 1430. It seems bulls are still able to hold 1400, bouncing over and under the 1420 level (blue straight line) but if the futures market right now is any indication, things aren’t looking good.
Earnings season is still looking ugly and there now is a chart going around of the U.S. Recession Probabilities index that once it gets to 20%, since 1967 we’ve gone into a recession. This index is currently at 19.56, so just a few hairs short of its recession trigger. Although, the economic systems that I’ve developed and monitor have yet to call for a recession (so far), it doesn’t mean one isn’t walking up our driveway like a late trick-or-treater.
So while many traders were expecting the ominous fog of uncertainty to be lifted once we knew who the president would be for the next 4 years then the equity markets would be free to rise like a balloon…this doesn’t appear to be taking shape according to the futures market this morning. While any major drop will likely still be bought as long as bulls can protect 1400, I just am not seeing the evidence to take us to new highs (at least not yet).
There are still plenty of economic and earnings-driven headwinds for equity bulls to battle, not to mention the fiscal cliff so many people appear to be worried about. I stand by pessimistic view of equities until the data proves me wrong. Trust me, I’d be happy to change my view if the price action would allow me to….it just hasn’t yet. I don’t have a crystal ball and I can’t tell you with any provable certainty where stocks are headed in the next 5 minutes or the next 5 years, but I can show you the price action and data that appears to be important, at least in my opinion.
Have a great day.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything written and/or displayed here is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.
