Each Earnings Season (one is in progress as we speak), I analyze my technical setups on individual stocks to see if they provide enough evidence to issue a "highly confident" directional call to MPtrader members. In other words, what is my chart work telling me about the likelihood of a bullish or bearish investor reaction to Earnings?
Suppose I apply the same approach to Tuesday's presidential election. What, if anything, is the current setup in the Cash SPX (Cash S&P 500 Benchmark Index) telling me about a bullish or bearish response to the outcome (presumptuously or not, I am anticipating there will be one!)?
The beauty of using my chart work is that above or below a particular level, the probability of EITHER upside continuation within the longer-term, mature bull phase OR a significant downside reversal into a potentially damaging correction increases meaningfully. This approach also removes emotion from what many think is the most consequential election in decades, owing to the acute polarization of politics in the US and the suitability or lack thereof of both candidates in the eyes of some 160+ million potential voters.
My attached Big Picture Weekly SPX Chart from the March 2020 Pandemic Low to the recent All-Time High at 5878.46 (established on October 17, 2024) indicates that as long as any forthcoming weakness is contained above 5595-5600 (roughly 2.2% beneath Friday's close at 5728.80), bulls (and the heretofore dominant bull trend) will remain intact, and as such, on a higher trajectory that projects into my 6000-6100 Target Zone.
However, a breach of 5595-5600 will trigger a warning signal in my work that the SPX is much more vulnerable to downside continuation into my "Gray Area" (see chart) from 5595 down to 5400, which, if violated, has the potential to inflict severe technical damage to the longer-term uptrend pattern.
Looked at another way, my work can tolerate a worst-case 5% to 6% decline from Friday's close at 5728.80 (11/01/24) in reaction to "the election outcome" or "no outcome" next Tuesday evening into Wednesday morning (ahead of Wednesday afternoon's Fed Policy Meeting!) without triggering a bearish intermediate-term signal that will have in its sights an initial Target Window of 4600 to 4800.
From an emotional perspective, the market reaction will gauge investor Certainty versus Uncertainty and Political Order versus possible Chaos. The great arbiter will be, as always, price action...
Join me and MPTrader members early this week for our post-election, post-FOMC, and earnings analysis of individual stocks, sector ETFs, macro indices, bond yields, precious metals, commodities, and Bitcoin ...