Unless you have been living under a rock somewhere you are painfully aware that there is an election tomorrow. It isn’t much of a surprise that things are heating up and this mid term is guaranteed to be full of drama.
Traditionally, a republican favored election would increase the likelihood of a rally in the markets. But there are a number of factors making this election not so cut and dry.
First, it is close. Well, as close as we can tell. If we’ve learned anything in the last few elections it is that the polls are about as accurate as the weather report. This means it is possible it could go either way and that the major impact of the election results are most likely not totally priced into the market. Up or down, it is probable that we will see some chop over the next week or so.
Another increasingly important factor in the elections is that they will be drawn out and most likely contested. Regardless of your opinion on this, it seems unavoidable and will also contribute to the volatility.
A big factor is also the relentless media cycle. This steady flow of information filled with spin and often inaccuracy will have an impact on the crowd reaction as people try to trade their way through this.
All of these elements point to one consistent path. Volatility.
An easy way to take advantage of this is to look at the ETFs that track the VIX, the CBOEs indicator of expected volatility. Both VIXY and UVXY are candidates if you are looking for a way to leverage the chaos.
Today will be a telling factor as VIXY is currently below all of its moving averages and looks to head further into over sold territory on the MACD. If we see this start to spike and move above the 10 day, that is a sign of a potential rally.
If we do get a wild swing up, we can expect that to most likely snap back relatively quickly. This is a result of the herd mentality that causes traders to overreact. The good news is that could be another great opportunity for a trade. Ian Cooper does a great job of spotting moves that allow you to use herd mentality to your advantage. You can check out is Trigger Point Trade Alerts here.
Keep learning and trade wisely,
John Boyer
Editor
Market Wealth Daily
PS-Ian has also just launched a new Chart of the Day newsletter. If you haven’t signed up for it you can get it here.
Recent Comments