Tuesday , 6 December 2016


Presidential Election Watch: Possible Impact On Markets

…The outcome of the upcoming presidential election…can impact the markets [and this articleInflation_Deflation2 outlines investor sentiment and what many investment managers are doing in preparation for the election results].

The comments above and below are excerpts from an article by Carl Adams (stockbarometer.com) which may have been enhanced – edited ([ ]) and abridged (…) – by  munKNEE.com (Your Key to Making Money!)  to provide you with a faster & easier read.

NAAIM Exposure Index

The Exposure Index below shows us what investment managers are doing:

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…The top line shows the leverage of bullish money managers (which is normally 1.5 to 2x in bull markets).  We’re just now starting to see a turn lower, which should work towards a bottom over the coming weeks. The key with this indicator is to wait for it to give you a bottom call which is a reading around 100 or below.  If you’re a stock trader, this represents a good time to consider a buy (in review with the specific stock chart of course).
Cumulative Tick Index
A quick review of our charts from this week shows sentiment working towards a bottom, but not quite there yet.  Oil inventories are topping, but the smart money continues to position for downside.  ETF Money flow is also topping, but equity fund flow has been selling off for some time – and our own Cumulative Tick Index is flashing some weakness per the chart below:
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The Cumulative Tick signal needs to start trending lower (which means buying pressure is leaving the market and selling pressure is taking over).  In ’07, that lead to very strong selling in the market.  In ’11, that resulted in a range bound market and in ’13, the market continued to trend higher before setting lows later in ’16.

Conclusion

…The election will dictate a lot of how the market behaves in the 4th quarter. If things remain status quo, we would expect the selling to hold off until late December.

If the current party remains, volatility will stay low.  If there’s a change in party, then investment managers will need to change to reflect the most profitable way to play the new administration.  This will increase volatility. 

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