Last week was red all week. In fact, we currently have had 9 down days on the S&P in a row. This has not happened since the 1980s. We also saw the break of 211 as we were expecting. Naturally, we should see a bounce tomorrow since we are extremely oversold and we had good news fro Clinton on the political front via the FBI. However, after such a long down move, the bears should have at least a retest of the lows based on TA. This could be a time when news trumps TA, so keep that in mind.
We are still seeing some outflows but this will slowly become a double edged sword. If we start to move higher, there is a good amount of money now on the sidelines that will rush back into the market.
It is clear that the market wants Hillary to win due to the status quo factor. A Trump win, which is still less likely, received a huge boost from the FBI revelations on Friday. Betting odds are currently around 17%. Last week the odds begin to move close 30%, and the market did get spooked. However, with the surprise FBI new his chances have fallen. Trump is the change candidate and if he does pull the election off there is sure to be some panic selling. We think that this would be a great buying opportunity. This has been the year of Brexit, just keep that in the back of your mind.
Also of note, long term yields on bonds have begun to act differently than in recent years. This could be an issue if yields keep on quickly rising.
We saw about a 10 point drop in the last few weeks. Bulls still have a weak buy the dip card. This means there is a slightly better, chance that bulls will buy this pullback. However, we think we first see a break of 210 back into the 2 year range. The key to find out if the bulls will be able use the card will be on how strong the selloff is into the range. The stronger the selloff into the range the better chance that the Bear might be real.
Long-Term Market Outlook (Updated 9/5/16).
This week is all about the election.
Trend Following Models:
My long term models are Bullish.
My medium term models are Bearish.
My short term models are Bearish but trending Bullish.