It is crunch time with US elections tomorrow

Abraham George Macro View

In the last few days, the gap in national polls between Trump and Biden has been closing in Trump’s favor. Both the candidates have been making last minute dashes to various states to make their final pitches.

The Senate hearings of last week has put major brakes for the continued rise in tech stocks. Twitter was down 21% on Friday despite good results. It is almost certain that a Trump victory will bring in more regulatory framework to challenge the lofty multiples the tech companies have enjoyed.

Under a Biden victory the lofty multiples in big tech, will be moving out and the next big secular trend could be replaced by the governments stimulus allocations for a ‘clean energy revolution’. In the same way how President Obama blessed the rise of many tech giants with the 2009 ‘Recovery Act’. Biden would do something similar, probably allocating a trillion dollars to clean energy and anointing the next future line of billionaires and may be a trillionaire.

Equities

It was almost 8 months ago when the Dow made a market high at 29,569 on Feb 12. After the nose dive in March markets rallied again to top out at 29,199 on Sep 03. The low on Sep 24 helped the markets to rally again after many overlapping subdivisions.

Finally the markets topped out again at 28040 in the Dow on Oct 22 the equivalent of which in the S&P 500 was 3415 on the same day. Prices since then are following a bearish structure. A pull back from current levels to 26,600 - 27,200 in the Dow and 3310-3360 in the S&P 500 cannot be dismissed.

All other breadth indicators are pointing to further falls in the market. A move down to 25,000 in the Dow and 3050 in the S&P 500 should not be surprising. There are two major event risks this week . One is the US presidential election tomorrow and the other is the Fed meeting on Thursday. We will not be short of volatility.

Bonds

As expected the Bonds topped out on the 174 handle at 174^29. A clear break of 172 where we are now should lead us to our next support at 170^30.

Euro

Our contention is that the Euro is in a triangle pattern. If so it should not break below 1.1610. It is important Euro rallies from current levels or close to these levels. Should it move below 1.1610 we need to reassess the structure.

Gold

Gold is trading up - down with a downward bias. Chances are more it will try to break below the Sep 24 low of 1849.

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.