What to Expect Following the Election

We got the move up to 1430 ES that I talked about in my last post and sellers came in and sold those gains as I expected. Key resistance remains at 1430.  I will be looking for a move up to test last week's high of 1431.50 and possibly break it. That should create another good shorting opportunity. Assuming resistance does hold in the lower 1430s, I will be looking for a  move lower regardless of who wins the election. Initial target to the downside is the mid 1380s. From there I will be looking for the market to find support and eventually form a pivot low that can be bought and held into the end of this year. We'll have to wait and see how price action behaves over time following the election before I get into any more detail there.

The markets should sell off regardless of who wins the election. Markets are already at four year highs and are showing signs of weakness following the announcement of QE3. In the case of a Romney win, assumptions of a change in Federal Reserve monetary policy will cause the markets to sell. In the case of an Obama victory, fear of tax hikes will cause the markets to sell. There is also a high possibility that the election will be close. Any contention or litigation questioning the legitimacy of the winner will cause more uncertainty in the markets and again will influence selling. But in both cases I believe that selling will likely be short lived. We remain in a loose monetary policy environment that favors low interest rates, inflation and devaluation of the US dollar. This is not going to change regardless of a Democrat or Republican victory. The Fiscal Cliff will be less of an event than many expect and markets should  resume their risk on mentality.

For today, look for a range bound market with potential to fade moves in either direction. I am biased to the upside as the election results come in, but like I said, resistance is strong at 1430 ES. A move up to or slightly above this level should provide a great shorting opportunity. I will be looking for the market to sell off below 1400 from there or following the election. First target to the downside is 1385-1388. Good luck and get out there and vote if you are eligible...