Technicals | Nov 08 2016
By Michael Gable
The S&P 500 Index was down for nine days in a row and had clocked up its longest losing streak since 1980. It is no wonder that it was due a bounce (are we really surprised?), and the last 24 hours have seen markets jump on the expectations of a Clinton victory – just as markets jumped in the days before the Brexit referendum. So does this mean we are buying the rumour, and even if Hillary gets in, we sell into that?
Before last night, the S&P 500 Index lost less than 3 per cent in the prior couple of weeks. In our opinion, that doesn't sound like a market factoring in a Trump victory. This means that we believe the Clinton victory has already been priced in, despite this so called "sell-off" in US markets. Counter to this, there is a lot of money on the sidelines that wants a home, and everyone seems to be getting very bullish again, so which way will it go? The big opportunities arise when something unknown comes out of nowhere, people panic, and it smashes the market to much cheaper levels.
This US election has been the most talked about in history. I just don't see the recent move down as the "opportunity of 2016" to buy into equities and that we have to make a rash decision before the election result. Let’s see what happens over the next few days/weeks and not go rushing in for the sake of it. There are still some good companies out there worth grabbing, but it needs to be on a case-by-case basis, not a "lets go all in for whatever I can get because Trump was defeated" mentality.
S&P500
The S&P 500 Index rallied strongly overnight which was inevitable after being down for many days in a row and heading into oversold territory. The key level we are looking at for resistance is the 100-day moving average which currently sits near 2145. The level of 2150 has also been a major one in the past, so unless we see a nice close above those levels, we would remain cautious. If the index retests those levels and fails, then we could see several-percent downside towards 2000. As mentioned previously, the most bearish scenario puts us back near 1870.
Content included in this article is not by association the view of FNArena (see our disclaimer).
Michael Gable is managing Director of Fairmont Equities (www.fairmontequities.com)
Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management, deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.
Michael is RG146 Accredited and holds the following formal qualifications:
• Bachelor of Engineering, Hons. (University of Sydney)
• Bachelor of Commerce (University of Sydney)
• Diploma of Mortgage Lending (Finsia)
• Diploma of Financial Services [Financial Planning] (Finsia)
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2
.jpg)
Disclaimer
Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities Pty Ltd is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
