Election follow up

Once again, InTrade calls the election. Here are some other observations from Tuesday's Election post:

-"out of 6 election year bear markets since 1960, Ronald Reagan was the only incumbent party to retain control over the White House in 1984. The odds favor Obama regardless of the polling assumptions."

There's no props there, that's just historical data, but historical data is part of our assessment in deciding when and how to trade and invest. The odds of a party change were stacked fairly high, like I said, even ignoring the obvious lead Obama had going into the election.

-"The decrease in volatility is exactly what the market needs to pull sidelined cash back into it."

That occurrence pulled cash into the markets on Tuesday as we saw a 4+% move in the S&P 500 on increased volume which also provided a solid breakout from the trading consolidation that has been underway. The Dow 30 and NASDAQ 100 both managed a respectable 3+% rally on Tuesday as well on increasing volume.

-"Another theme is certainty. If there's one thing the market hates, it is uncertainty."
and
-" So could the market's recent lack of volatility be a hint that the market has found its certainty in an election win for Obama?"
In retrospect, this was the obvious conclusion, but they're all obvious in retrospect, we need to make decisions based on the hard right edge of a chart, without the benefit of retrospect.

I mentioned a few drug makers that would probably come under pressure from an Obama win, AZN, LLY and PFE. LLY looks like a sort of bear flag which denotes the probability of further downside. AZN staged a false breakout above the 200 day moving average (blue on the chart) which has been acting as a support/resistance level for some time now, again the likelihood is that we see further downside in AZN.



Finally PFE right now has penetrated the last vestige of support in a very ugly bear flag. Taken the position of the flag, we can estimate a downside target for PFE of roughly $12, somewhere around another 25% loss.

AZN's downside target is harder to gauge, but there is some near term support that it is clinging to today around $40.65. It's not unreasonable to expect a retest of the $36 area.

I also mentioned XLE and it's decent performance on Tuesday, but looking at a weekly chart, it's obvious that the bull market in energy is over. OIH-energy services looks roughly the same. The party is over.

In Defense-NOC is falling out of a bear flag, BA also has resumed it's downtrend after faltering at the 50 day moving average. RTN seems to be in line with the rest of the sector.

I finally said "I expect in either case, the market will be down later this week." and so far today, from Tuesday's close, the SPY is down nearly 10%.

Well, things have changed, check out the videos for more detailed analysis.

I'll be releasing some videos later today to address each sector more specifically, opportunities abound.