Election Euphoria

Relief that the election mud slinging is finally over may have contributed to yesterday’s solid rebound, although some sense of reality may set in once the results of the Presidential race are known, which they were not at the time of this writing.

Equally important will be the Senate results to see if there are any shifts in power.

Historically, the rally was surprising as MSN Money reported:

In each of the six election days that the U.S. stock market has been open since 1984, stocks have barely moved. The biggest gains: 1.1% for the S&P; 500 in 1984 when Ronald Reagan won reelection over Walter Mondale and 1% for the index in 1996 when Bill Clinton defeated Bob Dole for a second term.

The New York Stock Exchange was closed on all election days through 1968 and presidential election days from 1972 through 1980.

Of course, hopes are high that the market lows made in October will represent the long awaited bottom. While I have my doubts, it does not mean we can’t go higher from here, but it’s questionable whether this will actually turn into a major trend reversal out of bear market territory.

Our Trend Tracking Indexes (TTIs) improved as well and are situated in relation to their long-term trend lines as follows:

Domestic TTI: -13.13%
International TTI: -20.79%

Based on some emails I have received, I am amazed about the lack of patience some investors are showing. They are itching to jump back in with both hands, although we clearly remain in bearish territory.

Given the volatility we have witnessed over the past 6 weeks, and the trouble this has caused equally for those with long and short positions, you’re better off waiting for the right signal rather getting whipsawed around. I will elaborate more on that in the next few posts.