STTG Market Recap Nov 6, 2012

Stocks continued to bounce off the lower end of their multi week range Tuesday as Americans headed to the voting booths.  The dollar weakened and commodities jumped; some attribute this to the belief that Obama will win and hence we have Bernanke for at least another year and then someone very like minded after.  But technically this was just another bounce that has yet to create much change in the structure of the index charts.  The S&P 500 gained 0.8% and NASDAQ 0.4%.

The S&P 500 did recapture the April 2012 highs of 1422, so that is a positive.  It remains below its 50 day moving average as well as the bottom end of the multi month channel it had been traveling since early June.   So the next areas of resistance  if there is a post election pop would be 1435 and 1450ish.  A break over the former would also create a new higher high – which would be a change versus the action since mid September.  The downside remains obvious at that 100 day moving average.

The NASDAQ had much less change, just a bounce within a smallish range, puncturing the resistance in the low 3040s would be a good first step for this index but of course it has much more work to do than the S&P 500 to begin looking healthy.

 

Nice bounce in gold and silver today but really only taking them back to where they were late last week.

Old school name AOL (AOL) was the star of the day on earnings; AOL reported higher-than-expected revenue and profit on the strongest advertising growth the company has seen in seven years.

Some election related statistics – if the market rallies the day after the election it usually lasts for a good while; however recent history (since 84) has shown very few day after rallies.

(1) From Sentimentrader.com:

When the S&P 500 rallied the day after a presidential election, then over the next week it continued to rally 6 out of 6 times, averaging +1.3% (not including the day after the election).  When it fell the day after an election, then over the next week it gained only 2 out of 8 times, averaging -1.3%.  The difference was similarly stark over the next two weeks, then turned random after that.  So short-term bulls may want to prefer an up day on Wednesday.

(2) From Bespoke Premium:

Although most of us will be happy to see Election Day come and go, the equity market has tended to trade with a post-election hangover the day after. Since 1984, the S&P 500 has averaged a decline of 0.90% the day after Presidential Election Days (median = -0.67%) with positive returns on just two out of seven days (28.6%)… With the exception of 1996 (Clinton re-elected), the S&P 500 generally saw a downward drift throughout the day.

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