Futures are off modestly on an important election day which will hopefully resolve plenty of unknowns.
On the bullish side of the aisle: both ES and SPX are safely above and have backtested their 2.24 Fib extensions; oil and gas have fallen sharply to decent support levels; VIX is at a modest level with a clear path lower if necessary; USDJPY has a clear path higher – at least temporarily.
On the bearish side of the aisle: inflation should be much lower in Oct as a result of oil and gas declines; interest rates are still pushing against important resistance; VIX experienced a golden cross on Friday; FAANGs are providing bearish leadership; and, many fundamental analysts have pronounced a democratic surge as bearish.
Both sides have played to their bases in this midterm. In several cases, this has resulted in excellent results for our forecasts. Consider, for instance, how much gas prices have dropped — mitigating the damage done by Trump’s Iran sanctions and helping our oil/gas forecasts working out quite nicely.
The assistance provided by currency moves has played nicely into our USDJPY forecast.
As we learned after the 2016 election, the market moves the way the algos dictate. The only question is whether the algos will receive enough “guidance” to keep stocks on the rise. It should be an interesting next couple of days.
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