Simpler Sentiment – Weekly Wrap-Up 11/11/16

Well, the election is over. The low probability event came and had a huge impact on the market – just not the one that was expected.

The S&P 500 futures were limit down to 2028 shortly after the election results became known. But the rally came quick and fast and we were up more than 7 percent from that low to yesterday’s highs. The VIX was up above 21 on Wednesday morning and has fallen back to 15.

One interesting factor is the outperformance of the Russell 2000 over the last week. It is up every day this week to a new all-time high above 127.

It is highly probably that we see move volatility over the coming weeks, and that could be increased by the unwinding of the pre-election hedges.

Henry is looking at the current S&P 500 within its range. “With the S&P 500 trading around 2150 and with 2150 being the middle of the range dating back to July, I think we have to start thinking about November expiration. The emotion around each side has been thrown hard enough that direction is difficult, but fading those emotional extremes seems to make the most sense headed into next week.”

Chris thinks that the SPX will test 2100 next week but adds that “the only caveat with my prediction is the time of year – usually right before Turkey Day, the divergences don’t play out”.

On Friday morning, Tony was looking for weakness out of the S&P 500 futures, “if we get a weak close on Friday, Full Moon trading on Monday will have me looking for considerably lower prices searching for the gap at 2094.25-2108”.

Carolyn is looking for higher prices in the S&P 500, “after the roller coaster ride around the election, the current pattern of the SPX suggests eventual new highs”.

David agrees, “All the continued evidence still suggests that the decline since August is corrective and we’ll eventually head back up. It is starting to look like that turn back up in the S&P 500 has begun. This has the potential to be an explosive rally. Look to market breadth for clues. If breadth can start to expand as the market advances, then look for surprises to be to the upside while last Friday’s low holds.”

Tucker is taking a more focused look. “Now that the election is over and Trump is the President-elect, we could be seeing the beginning of market sector rotation. Trump is focused more on America than globally. He wants to create more US jobs and improve healthcare. In the ner term, I am looking for continued weakness in Asian stocks and strength in US based companies. Also, look for weakness in interest rate sensitive stocks like utilities.“

Bruce “As the election is over, I think we may chop in a wide range, but I don’t see anything major either way. We may rally some, but we still have the ECB, NFP and the FED on tap, so I think we stay range bound. Elevated vols and ranges bound = Iron Condor.”

On tap next week:

Bruce’s “Getting The Greeks” 4 part series

Chris McKhann

Chris McKhann

Chris McKhann has been involved professionally with the stock market for more than 15 years and specifically with derivatives for 12 of those. He started as a stock broker, but quickly moved on to options and futures trading. He spent some time as the Derivatives Product Manager for TD Ameritrade. He was the chief analyst and hedging strategist for OptionMonster. He has been an options trading educator and content provider for many years. His writing and analysis has been featured on Reuters, the Wall Street Journal, Forbes, TheStreet, CNBC and internationally. He has also designed and traded option and futures strategies for prop trading firms and hedge funds as well as managed accounts.

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