Election Day Optimism Drives Market Surge

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[Chart courtesy of MarketWatch.com]

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On this election day, traders viewed the market positively, driving the major indexes out of their recent slump and buying a wide range of assets, including stocks, bonds, gold, Bitcoin, and crude oil.

Wall Street is closely monitoring not only the Presidential elections, but also which party will dominate Congress, as any sweep could lead to significant changes in spending or tax policy.

While the election results can significantly impact market direction, this uncertainty might create more short-term volatility. Historically, however, the major indexes have tended to gain between election day and the end of the year.

Traders believe that a divided Congress would be the most favorable outcome, as it would likely limit severe policy changes. Additionally, the Federal Reserve’s decision on rate cuts is expected Thursday, with a 96% chance of a 0.25% reduction.

Today, the most shorted stocks were squeezed, and bond yields fluctuated, with the 10-year yield rallying to 4.36% before reversing to close nearly unchanged at 4.29%.

The dollar declined, while gold posted a small gain. Bitcoin underwent a wild ride, reaching $70.5k before falling back to around $69k. Crude oil followed a similar pattern and ended the day higher.

Although the election results are still pending, the Federal Reserve’s upcoming interest rate announcement on Thursday is likely to add to market volatility.

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Election Uncertainty Weighs On Markets Despite Bond Yield Plunge

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

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The early market movements were characterized by aimless meandering with a slightly positive bias, but ultimately, the major indexes ended the day in the red.

This decline occurred despite a significant drop in bond yields, following a relentless rally that had pushed the 10-year yield above 4.3%. Today’s yield drop might indicate that traders are reducing risk by shifting from equities to bonds.

Nvidia continued its bullish surge, likely fueled by its upcoming addition to the Dow Jones Industrial Average, replacing Intel, which is being removed. Nvidia has soared over 170% year-to-date, while Intel has seen its value more than halved.

Although some polls show the Presidential race as deadlocked, the markets are more concerned with which party will control Congress. A divided House and Senate would result in a status quo, which traders favor, as it would prevent sweeping new spending plans or tax overhauls.

Later this week, the Federal Reserve will announce its latest decision on interest rates. While there is a 96% chance of a 0.25% cut, most attention will be on Chairman Powell’s commentary following the meeting.

In today’s session, big tech stocks skidded, the dollar slipped, and gold remained stagnant. Bitcoin, after reaching record highs last week, headed lower, while crude oil found some upward momentum, erasing last week’s losses.

All eyes are now on tomorrow’s election.

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ETFs On The Cutline – Updated Through 11/01/2024

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Do you want to know which ETFs are hot and which ones are not? Then you need my High-Volume ETF Cutline report. It tells you how close or far each of the 311 ETFs I follow is from its long-term trend line (39-week SMA). These are the ETFs that trade more than $5 million a day, so they are not some obscure funds that nobody cares about.

The report is split into two parts: The winners that are above their trend line (%M/A), and the losers that are below it. The yellow line is the line of shame that separates them. You can see how many ETFs are in each group and how they have changed since the last report (237 vs. 210 current).

Take a peek:

The HV ETF Master Cutline Report

If you are confused by some of the terms we use, don’t panic. I have a helpful Glossary of Terms for you.

If you want to learn more about the Cutline method and how it can make you rich (or at least less poor), read my original post here.

ETF Tracker Newsletter For November 1, 2024

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

AMAZON AND INTEL LEAD MARKET REBOUND AMID DISAPPOINTING JOBS REPORT

[Chart courtesy of MarketWatch.com]

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Amazon led today’s market rebound, surging over 6% thanks to its ad business and cloud services exceeding expectations. Intel also contributed significantly, jumping nearly 8% after surpassing forecasts and issuing strong guidance. These gains helped erase the negative sentiment from previous earnings disappointments.

Despite a disappointing jobs report, the bullish tone set by these tech giants remained unshaken. The economy added only 12,000 jobs in October, far below the estimated 100,000. In fact, the number turns negative at -28,000 when excluding newly created government jobs. This marks the weakest job creation level since late 2020, potentially reflecting a more accurate economic reality as past reports have often been revised.

Bond yields underwent a volatile session, with the 10-year yield starting flat, then selling off, and finally rallying to close at 4.38%, its session high. This volatility impacted major indexes, with the S&P 500 and Nasdaq ending the week as the biggest losers.

The dollar initially tumbled but recovered to close higher. Gold had a tumultuous week, hitting a new record on Tuesday before succumbing to profit-taking. Bitcoin followed a similar pattern, closing slightly higher for the week.

With the upcoming election next Tuesday, market volatility is bound to pick, despite Wall Street viewing the “Trump trade” as favorable.

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Weekly StatSheet For The ETF Tracker Newsletter – Updated Through 10/31/2024

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ETF Data updated through Thursday, October 31, 2024

How to use this StatSheet:

  1. Out of the 1,800+ ETFs out there, I only pick the ones that trade over $5 million per day (HV ETFs), so you don’t get stuck with a lemon that nobody wants to buy or sell.
  1. Trend Tracking Indexes (TTIs)

These are the main indicators that tell you when to buy or sell Domestic and International ETFs (section 1 and 2). They do that by comparing their position to their long-term M/A (Moving Average). If they cross above, and stay there, it’s a green light to buy. If they fall below, and keep going, it’s a red light to sell. And to make sure you don’t lose your shirt if things go south, I also use a 12% trailing stop loss on all positions in these categories.

  1. All other investment areas don’t have a TTI and should be traded based on the position of each ETF relative to its own trend line (%M/A). That’s why I call them “Selective Buy.” In other words, if an ETF goes above its own trend line, you can buy it. But don’t forget to use a trailing sell stop of 12%, or less if you’re feeling nervous.

If some of these words sound like Greek to you, please check out the Glossary of Terms and new subscriber information in section 9.

  1. DOMESTIC EQUITY ETFs: BUY— since 11/21/2023

Click on chart to enlarge

This is our main compass, the Domestic Trend Tracking Index (TTI-green line in the above chart). It has broken above its long-term trend line (red) by +5.27% and is in “Buy” mode as posted.

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Inflation Concerns And Volatility Mark End Of October Trading

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

  1. Moving the market

The major indexes faced early declines as disappointing quarterly reports from two tech giants dampened any bullish sentiment. Microsoft’s shares fell over 5%, while Meta slipped 2.2% due to missed user growth expectations and a warning of significantly increased expenditures next year.

Throughout the week, mega-cap earnings painted a mixed picture. Alphabet saw a nearly 3% rise on Wednesday, but AMD plummeted over 10% following disappointing guidance. Investors are now eagerly awaiting reports from Apple and Amazon, which are due after the market closes today.

The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, came in slightly hotter than expected for September at 2.7% versus the anticipated 2.6%. The headline PCE rose 0.2% month-over-month, bringing the year-over-year PCE down to 2.1%, its lowest since February 2021. Overall, these figures were in line with estimates.

Increased volatility was evident on this last day of October, a month historically known for significant downside surprises. Today’s sell-off pushed the S&P 500 into the red for the month, albeit by a modest 1%, with all major indexes experiencing losses.

Inflation concerns were prominent, as the Bloomberg Economic Inflation Data Surprise index accelerated after a September downturn, leading to a slower pace of rate cuts.

The Nasdaq led today’s downturn, with all Mag7 stocks slipping. For the month, the basket surrendered nearly all gains, unsurprising given the spike in bond yields, with the 10-year yield up 0.6%, contrary to the Fed’s expectations following a 0.5% rate cut.

This anomaly extended to the mortgage market, where rates soared above the critical 7% level in October, despite the Fed’s rate cut.

The dollar also surged higher, and interestingly, gold followed suit, gaining for the eighth month out of the last nine and setting several record highs. This suggests that inflation fears remain significant, and the Fed’s aggressive cut may have been a policy misstep.

Despite today’s weakness, Bitcoin had its best month since May, rallying close to its record highs near $74,000 yesterday, supported by record BTC ETF inflows during October. Oil prices, after an early October rally, lost momentum but managed to close in the green over the past two days.

With the aggressive Fed cut leading to various unintended consequences, the USA’s sovereign risk of default has surged, unsettling traders as we move into November.

Do we need to brace for impact?

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