Election news keeps up market volatility
Abraham George Macro View
We only have another two weeks left for the US elections. As it comes closer the level of uncertainty will continue to increase. The polling gap between Biden and Trump could also narrow which will increase the tension.
The final presidential debate is on coming Thursday. It will be something to watch but things happening at Capitol Hill is also important. House Speaker Pelosi and Treasury Secretary Mnuchin have still not broken the stimulus stalemate but something can still be worked out. It seems unlikely a comprehensive deal will be reached before Election day.
The polls clearly suggest Biden is poised for a big night on Nov 03. Since Trump’s COVID diagnosis it has been discouraging with his numbers in the polls. We saw similar situations in 2016 too. This election appears to be more a referendum on Trump’s handling of the coronavirus than Biden being a great democratic candidate. With cases rising across most of the country, it seems like a tall task for the president.
Equities
Friday’s price action in the Dow and S&P 500 is not very convincing. The advance / decline ratio was .7 : 1 meaning there were more shares that closed lower than that closed higher. The NYSE trading index closed at .76 implying that a lot of buying power was spent to keep the market higher. The pattern in the Dow and S&P 500 is the same . Only a close above the Oct 12 high can be convincing for the markets. With many event risks in the coming days one should be prepared for unexpected volatility. A move below 3441 in the S&P 500 will clearly damage the upward momentum.
Bonds
Bonds have made a three wave corrective up move implying the next move should be to the downside. The near by targets are down to 170 but a break of support at 173^10 is very important.
Euro
Only a decline below 1.1612 will change the outlook for Euro. It should very soon start challenging the highs of Sep 01.
Gold
When everything looked good for Gold to break up it has let us down again. Gold currently is trading very technically. So one has to open for a break out in either direction. The support at 1873 should hold and further break above 1934 has to happen for gold to test resistance at 2000 and further out at 2073. On the contrary a break below 1849 could open the flood gates for a much deeper correction.
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.