1. Moving the markets

With most of the mid-term election results being on deck later tonight, it came as no surprise that the markets meandered, but with a bullish bias, as all 3 major indexes closed in the green with last minute buying helping the bullish cause, although on ultra-low volume (60% below average).

Polls and forecasts occupied the headlines where opinions varied widely ranging from “what happened to equities after every midterm” to “a healthy 30%-plus correction headed for stocks.” Of course, someone is bound to be dead wrong when you consider totally opposing views.

One investment firm summed the current scenario up this way:

“It is definitely not the time to buy the dip,” said London & Capital’s CIO Pau Morilla-Giner. “Everything that could go well for U.S. consumers in the last couple of years has gone well, but now the tide is turning… At the moment, you are running out of drivers of growth in the U.S.”

I agree with this assessment but will add that momentum can turn quickly even in the face of slowing fundamentals. There could be a relief rally in store, so we need to be prepared to jump back in should our Domestic TTI (section 3) crosses back above its long-term trend line. As of today, we are only -0.41% away from a new “Buy” Signal.

On the other hand, the Fed will make his announcement regarding interest rates tomorrow around noon which, depending on the outcome, could wreak havoc with the markets. It promises to be an interesting next few days.

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1. Moving the markets

In view of tomorrow’s mid-term elections, the markets meandered with a slight upward bias in hopes that Tuesday’s outcome will not shift the balance of power, which could be key in terms of future market direction.

Two of the three major indexes gained moderately on news that a Rasmussen poll showed hopeful signs for the GOP. Of course, poll results can vary wildly and are better disregarded until the final count is completed. The Nasdaq was the laggard, as Apple still proved to be the anchor after announcing that they no longer have plans to disclose unit sales for some of their key products.

On Wednesday, we will find out if the Fed will hike rates again, which could spark a whirlwind on Wall Street. Should the GOP, which traders consider market positive, come out ahead, a rally may ensue, which, however, could be ruined by the Fed announcing an interest rate increase.

If they don’t, we may see the markets take off and, depending on the magnitude, we may see our Domestic Trend Tracking Index (TTI) break back above its long-term trend line into bullish territory, thereby signaling a new “Buy.”

Right now, we must be patient and see how things play out.

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1. Moving the markets

Continued hope for a trade resolution with China provided the assist the markets needed to score another winning session, it’s first 3-day win streak in six weeks. Also hope that Apples’ afterhours earnings report would be a blow-out event contributed to the upward thrust.

The overall positive tone from the US and China regarding their trade negotiations unleashed several things at once. First, the Chinese Yuan jumped sharply and second, we saw the biggest short squeeze since June 2016. While this effect was momentarily bullish, one look at this chart shows what happened last time after such an euphoric event.

The 1^st fall guy was the US Dollar, which moved opposite of the surging Yuan and registered its biggest single-day drop since March, which gave gold a boost to the upside while breaking above its 100-day M/A. The 2nd fall guy was crude oil, which was hammered to the $63 level and homing in on bear market territory (-18% from the recent highs).

Today’s upbeat tone in the equity arena helped improve the positions of our Trend Tracking Indexes (see section 3), which are now heading towards a trend line break to the upside, but we are not there yet. However, another upswing along today’s magnitude may bring a new “Buy” signal into play—at least for the domestic arena.

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