As of Thursday, November 3, 2016 at the close of trading EquitySurge™ has continued a strong buy signal for USA equities.
The S&P500 Index dropped today to just above its 200 day moving average which resides at around 2082. The low for the day on the index was 2085. This area should represent major support over the coming days, but this does not mean the index cannot go lower briefly in a panic spike down in fear.
Clearly the stock market is discounting the results of the presidential election, but whatever the outcome there is likely to be a substantial bounce higher in price in the days following the election next Tuesday.
Liquidity, the most reliable indicator of stock market direction, is still telling us to buy this dip as the liquidity backdrop remains strongly supportive of higher stock prices.
The “October Surprise” revelation last week from the FBI that it is looking into more emails related to the Hillary Clinton private email server investigation caused the stock market to discount (sell-off) the now higher likelihood of a Trump presidency. Without regard to politics, the stock market likes certainty over uncertainty, and prior to last week’s surprise FBI announcement the stock market was pricing based on a Clinton presidency, the more familiar and certain outcome of the election. Now this week many polls are reflecting a much closer race so the market has re-priced the results of the election to reflect the more uncertain outcome of a Trump win.
At this point the stock market has descended to major support very near the 200 day moving average, and this likely means the bottom of this repricing “correction” is at hand. The object of stock market investing is to buy low and sell high. What we have right here right now is a 5 percent drop from the Summer price highs on the S&P500 Index, which has left the index perched right on major support in an oversold condition. At the very least we should expect a significant bounce higher off this support level as soon as the election is over, no matter what the outcome since now either candidate winning is already priced in. This is the definition of buying low.
After the post election bounce we will watch what liquidity does, which will tell us if this was just a 5 percent correction tied to the “October Surprise” and the election, or something else. It seems highly unlikely that this drop in price is anything other than the machinations of a stranger-than-strange election being priced into the market.
If you would like to review the EquitySurge™ trading signals generated so far in 2016 please see the Trading Signal Performance Chart page.