US ELECTION - A FOREGONE CONCLUSION?

Equities from Australia to U.K, are having a bumper day (November 7, 2016)! Stock market investors are said to have responded to the FBI's decision not to go after Hillary Clinton. Looks like these guys want a lady as the next US President.

But the turnaround could also just be a relief rally BEFORE the next rout starts. After all, if the race to the presidential finish line turns out to be as close as reported, we will only know more by next Wednesday morning.
Source: chartnexus,
THE CBOE Volatility index, June 2016 till now.
Source: chartnexus,
S&P 500, as BREXIT NO VOTE HITS.








The CBOE volatility chart provides insight into the currents in the marketplace:

Focus on the left of the chart, above the "BREXIT" ARROW.

  1. The last big spikes occurred end of June in conjunction with the shocking No Vote in the UK, opening the door to the BREXIT, the exit of the UK from the EU. The chart movements then are relevant to today.
  2. Initially volatility rose, and markets slumped from June 3-14. 
  3. Just BEFORE the BREXIT vote, markets rallied - and volatility reduced.
  4. As soon as the results were sprung onto the unsuspecting public, volatility levels jumped straight to a peak (23-27th June).  
  5. Markets rallied strongly thereafter. 

NOW COMPARE WITH CURRENT EVENTS, RIGHT SIDE OF THE CHART:


  1. We note NINE consecutive rising days in the volatility. It is indeed very rare for such a steep rally to go further now without an interruption. 
  2. Today's relief rally provides the interruption. Stock markets are up, so are US Futures and the USD.
  3. Using historical comparison, I expect the interruption to be short lived and then followed by a much stronger rise in volatility - all within the next 3 weeks.
The technical picture in most major markets is supporting my conclusion. Only China's 'A' shares look as though they will come through reasonably unscathed.

Given the threats of the Trumpsters that a result for the "wrong" candidate (Not Him!) would be strongly contested, the expected certainty after the election may not return as promptly as expected, leading to more financial market losses, an outcome that is supported by technical indicators.

The Ace is Trumped?

In card games, once a winning colour is declared, even the smallest number can trump the highest Ace of all others. Will it be RED?

Trump's threat to the US electorate, should they deny him the presidency, is about as ominous as Hitler's threat to President Paul von Hindenburg (and the Weimar Republic, as the last and feeble remnants of democracy) to appoint him as German Chancellor - or else (1933). "ELSE" then followed regardless.

The mood then might have been a little different to what is happening in the US today, but TRUTH plays as little a part today as it did then. With the help of our glorious social media, spreading untruth unchecked, untruth becomes a winning propaganda, Mr Goebbels would have been proud of. And win, Mr Trump still might! If he does, TRUTH will have a very hard time and many years to spend before a successful comeback.  In the meantime Untruth will rule with impunity (paraphrasing Obama response to Trump's tweet yesterday)  and the world might polarise into position posing as good and evil as it did in the '30s and '40s. Wars are already being fought. No differences there either.

America has to decide.

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