Today is Election Day. How will the markets react after the election is over and we have chosen a new president for at least the next 4 years or maybe even longer? There are many opinions out there, but does anyone really know?
Let’s review what has happened with the S&P 500 the past 2 weeks. Trump appears to be gaining momentum and cutting into Clinton’s lead. The S&P 500 ends up being down for nine consecutive days, the longest period since 1980. Over the weekend there was a news release that once again clears Clinton, and then on Monday the markets recover about 60% of the nine day drop in just one day. Based on what has happened over the past 2 weeks, it is pretty easy to come to the conclusion that if Clinton wins the markets will go up and if Trump wins the markets will go down.
There is also the possibility that the initial market move after the election is not the longer term move. It could just be a head fake to flush everyone out, and then move the opposite direction. Do you remember what happened after the Brexit vote in June of this year? Take a look at the S&P 500 chart below.
Right now, the markets are very news reactive and volatile. If you are day trading, the volatility is to your benefit and you can trade the direction of the day. However, if you are trend trading, these swings that we have seen recently make it more difficult. This is a time to really be selective in your trade decisions. It is not a good time to be over-trading. It is also a time to be patient. Wait for the trade to come to you and do not chase it.
Remember, as retail traders we do not move or lead the markets, we follow the markets.
Try to keep an open mind, and use price to help you in your trade selections.
I hope this helps,
Simpler is Better.