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Sunday, October 10, 2004
Market Recap
The heavy selling on Friday was a follow through of the selling that started on Thursday. The selling took the Dow down -70 more points, dropping this index below its 50 SMA again. The NASDAQ fell -28 points but still remains far above its 50 SMA. The S&P lost -8 points but is in far better shape technically than the Dow and NASDAQ. The S&P managed to stay above its 200 SMA, closing just 3 points above it.
Possible Market Reaction To Election Results
After watching the presidential debate Friday night, it seems very clear to me that the stock market will not like either of these candidates no matter who wins. However, I think the market would be better off if the incumbent is re-elected. I am not sure how the market will react upon the outcome of the election but here are a few possible scenarios:
1) The market could rally big no matter who wins because the uncertainty surrounding the election will finally be over.
2) The market could run up in the final three weeks leading up to the election and then sell the news on November 3rd. If there is a rally prior, a sell the news scenario would not surprise me at all.
I think it is safe to say, if Kerry wins, the market will be disappointed and sell off. In this case, 2005 could be a dreadful year, stopping the Bull in its tracks. One thing is for sure, if Kerry wins, I will be shorting all the major drug companies.
If President Bush is re-elected, the market should rally. Although I do not think the stock market likes either candidate at this point, I think it would rather have Bush over Kerry. In this case, the market will rally at least a little just because the election is over with and in the markets eyes, although not the best leader in the world, he is the better of the two choices right now.
These are just my opinions and by know means intended to attempt to predict what will happen. These are just some possible scenarios and you should not invest or trade based on how I think the market will react to the outcome of this election. It is anyone's guess at this point.
Caution: Flags and Pennants
When markets decline after running up, they tend to form flags on many charts. This is good news because it gives us a chance to buy the pullbacks in strong stocks. Stocks that were making new highs are now forming flags. This is good consolidation action, and it is considered healthy for the market and these stocks. At the same time, during this market pullback I have seen several flags and pennants that were setting up before the market turned down, turn negative. What are normally very reliable patterns have been not been as reliable in the last two trading days.
Message Board Team Work
I would like to thank all our traders for making our message board the best on the net. We have some excellent traders who watch the market and provide some great TA along with some super stock picks. I am happy to see all the teamwork on our board during the trading day. A great example is TMTA on Friday. A member posted this play on our board when the stock was $1.65 and showed us the Flag formation. Many of our members acted on this play just before a spot on BSNBC. Right after the piece aired, the stock shot up to $2.00. It is rare that we can ever get in a stock prior to a run-up caused by a media mention, but Friday we did, and many members made a quick 20% within minutes. This is a great testimony to the team work on our board and my thanks go out to all involved.
Earnings season
Earnings season will be in full swing this week, and some heavy hitters are reporting on Tuesday like big cap leaders INTC and YHOO. Keep an eye out for earnings release dates on stocks you own. It is inherently risky to hold stocks through earnings.
FOX watch
Watch FOX this week, it may be worth a quick play. It is normally a very slow mover but I think it will get a slight boost this week because the ratings for the Yanks/Sox series will be through the roof. I bet FOX sports will have a record audience for these games. This series will be bigger than the World Series.
OTC BB Watch List
- SUMU
- WLSF
- AOGI
- NSOL
Stock charts listing
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