President Obama has broken long-term resistance in his battle with Mitt Romney. How are the markets and economy reacting? MoneyShow's Tom Aspray shares his key concerns for the continued health of the post-QE3 rally.
Stocks tried to turn higher on Friday, but sold off in late trading to close the week lower. So far, the pullback from the post-Fed rally has been mild, with the major averages down just slightly from the highs.
The correction camp seems to be getting a bit more crowded lately, while many of the more outspoken bears, those who can’t make sense of the rally, have become less vocal.
It is a concern that some of the long-term bears have changed their tune. In the past, this has often led to sharp market corrections.
On most investors' minds is the upcoming election and what impact it will have on the markets and the economy. Whatever your political affiliation, it is definitely worth keeping an eye on Intrade.com.
One group of traders have already decided who they think will win the election. Last week was not a very good one for candidate Romney, but the tables could turn and maybe next week it will be President Obama’s turn. The chart above (courtesy of www.intrade.com) shows the current market data of those predicting an Obama win in the election.
The chart was in a broad trading range from May 2011 to September 2012, when it staged a high-volume breakout above the resistance at line a. Technically, this completes the bottom formation (lines a and b), with the initial upside target at $8.20. There is good support in the $6.20 to $6.50 area.
Intrade values the share price at either $10 or $0 once the election is over. Those who purchased the Obama shares will get $10 a share if he wins or $0 if he loses. Of course, you can also sell short, so anyone who doesn’t think Obama will win the election could sell the shares short around noon Friday at $7.18 and if Obama loses it would drop to $0.
Alternatively, you take the other side if you are predicting a Romney win. The chart of those predicting a Romney victory appears to show the completion of a double top formation (line a). This year’s uptrend (line b) was tested in July and August, but was decisively broken this month.
The solid uptrend from the 2011 lows (line c) has just been broken, as the price has dropped well below $3. The chart now shows heavy resistance in the $3.80 to $4 area.
Of course, this data should be taken as just one piece of information, although they were right in 2008 and called the very tight 2004 presidential race correctly. They even got each state winner right.
NEXT: The Larger Economic Picture