Four More

We have a winner. Barack Obama has been elected to a second term, and whether you like it or not, the market should remain relatively stable in the short term. While the S&P futures were lower in very light overnight trading, the fact is that the markets in the end really want stability.

The markets, like most Americans, seem resistant to change as our national predisposition is towards some sort of certainty. Equity indexes tend to favor the status quo and a continuation of the current situation (no matter who crappy it is). Whether this is right, wrong, or downright insane, we seem to be a contentious nation who likes a good fight, but in the end wants to remain firmly grounded in the center so we can all just pretend to get along.

In fact, history shows that stocks seem to like a definitive resolution after a tight race. Median equity performance in the weeks following very competitive elections slightly outpaces performance following less competitive contests.

Closer presidential races generate bigger rallies after the victor is chosen, with the S&P 500 rallying an average of 5 percent by the end of the year when one candidate led by about 3 percentage points or fewer, Deutsche Bank AG wrote in a note Oct. 25.

In 28 presidential races since 1900, the Dow has gained 17 times between election day and the end of the year, according to data compiled by Bloomberg. The mean return is 1.6 percent.

That said, this election is unusual in that it will be immediately followed by debate on the fiscal cliff, and thus resolution of the election will reduce, but not eliminate policy uncertainty. The President has basically run on (the premise) that his economic policies are correct. They just need more time.

We will still have the same flawed economic policies that enable the corrupt banksters and the status quo. But good or bad, this is the situation and we will all return to our trading screens and peacefully coexist. That fact alone puts us in a better position than majority of the world.
In the end, you can try to look at the positive. But remember, the age of moral hazard continues and at Trading Advantage, we will keep a close watch on it for you!

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.

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One Gold and one Oil trade!

NOTICE: Testimonials are believed to be true based on the representations of the persons providing the testimonials, but facts stated in testimonials have not been independently audited or verified. Nor has there been any attempt to determine whether any testimonials are representative of the experiences of all persons using the methods described herein or to compare the experiences of the persons giving the testimonials after the testimonials were given. The average reader should not necessarily expect the same or similar results. Past performance is not necessarily indicative of future results. No person was compensated for providing a testimonial.

Volatility Commentary

Support, Resistance, and Volume

In trading volatility, the future direction of stock prices are of little importance. The characteristic movements of stock prices, however, are important.

Usually when an underlying is showing heavy volume being traded, that could serve as the first signal to indicate that the price action could show decreasing volatility moving forward. This is especially pertinent if the price is trading around a previously confirmed support or resistance price levels.

Executing a calendar spread--selling the front month options and buying the options of an expiration month further out could be effective strategies in such instances of heavy stock volume near support or resistance price levels. Today in class, we analyzed purchase of calendar spreads on HES and WHR.

Currency Spotlight

The Australian dollar might become the best performing currency for the rest year. This week’s announcement by the Reserve Bank of Australia to keep interest rates steady at 3.25% stunned most economists. The expectations were for rates to fall by 25 basis points, but they were kept steady at 3.25%. Expectations will probably lean towards a rate cut at the next meeting in December or possibly in February.

The comments in the RBA rate statement highlighted the central banks concern for inflation and the slight improvement in the world economy. If we however continue to see improving data out of Australia and China, expectations for a rate cut may soon become expectations for a rate hike.

Today, the Australian Bureau of Statistics will release key figures regarding the labor situation down under. If the unemployment rate stabilizes or falls, further Australian dollar strength may persist and the doves will start becoming hawks. The next major news event, Private Capital Expenditure (inflation related statistic) will then come on the 28^th of November. This could provide an open path for further Aussie strength as long as no major risk off events occur, such as the 'fiscal cliff' or Greek exit.

Watch List

On this election day the old adage of "buy the rumor, sell the news" came into play. The rally that happened was supposed news of a Mitt Romney victory being imminent, and once the market realized that it was just a "rumor" it had a slow grind back down only to settle sideways until the close.

I expect a wild market tomorrow and while I hear the market will do "this" if one candidate wins and the market will do "that" if the other candidate wins, are we forgetting that the market will just keep trending up like most of the year? What will change in the short term? It's not like any monetary policies will happen immediately and we shouldn't forget that we still have Quantitative easing taking place. I expect business as usually in the following weeks, but please do understand it will be a wild ride. It will be a volatile market, and there will be swings not only in certain stocks and sectors, but in the markets themselves. So there will be great opportunities to take advantage of short term plays, and I highly recommend that if you are profitable to take that money and run while you can.

Now with earnings season coming to an end, the big mover today was Fossil(FOSL). Now FOSL had missed estimates and they paid dearly being down over 10% at the close after having a small upside push the last 3 days. It has been in a level of congestion/range bound and sure enough it bounced off the support level and closed well off its lows. Will this be another stock that misses earnings and steadily climbs for the next few months such as LOW? Would not surprise me one bit considering these days that good means good and bad means really good(BUY BUY BUY!!!-Cramer) Open Position: CHKP Stocks to Watch: AMZN AAPL GS ANR FSLR BAC C FOSL NFLX GMCR IBM CAT CMI DE

Futures Data

Value Areas:

ES 1427.25 / 1418.25

POC… 1423.50

YM 13214 / 13130

NQ 2683.25 / 2667.75

Notes from the Pit

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Charles Moon - Taking Positions in Stocks

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