The Election Rally Is Here
And The FOMC Threaded The Needle
The Markets
Stocks and cryptocurrencies are running a ‘gap and go’ sequence after a quick and decisive election process eases tensions. SPY is up nearly 5% since tapping its 50-day MA three trading days ago.
Jerome Powell kept the rally going this afternoon, cutting rates by 0.25% (as expected) and explaining the economic and inflation situation in a way that addressed his concerns but without spooking the markets. In other words, no surprises.
Since we’ve been keeping a close eye on the Roadmap🗺️ lately, here’s another update with an added AVWAP🔴from the Election gap. We can see that SPY and QQQ continue rising strongly while IWM and DIA are staying closer to that AVWAP.
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The Charts
SPY gapped above the previous pivot high of $585.91, retested the level briefly, and then moved higher on heavy volume. RSI isn’t yet oversold, nor has the 8-day MA crossed above the 21-day MA. The bull market continues as prices get a bit extended in the short term. Look for consolidation in the coming days.
QQQ Wednesday’s gap up open didn’t take QQQ immediately above the pivot high, but it did move well beyond by the close. This index is now up over 6% since the consecutive inside days of Friday/Monday.
IWM wins the prize for the biggest gap-up opening, jumping by 5.5% from Tuesday’s close to Wednesday’s open with volume nearly 3 times the average. Have we finally seen a definitive breakout in the small caps? It certainly seems so.
DIA rounds out the top 4, gapping over previous highs and adding to those gains today.
TLT continues to struggle. The action paints a different picture for government bond yields (which are rising) relative to the Fed Funds Rate (which was lowered today).
DXY US Dollar futures moved sharply higher with stocks Wednesday but gave back most of those gains today.
BTCUSD is the clear leader, rising almost 15% since election night, sealing the breakout.
VIX With the election uncertainty out of the way, volatility returns to the lower end of its range.
The Trade
FOMO is the biggest risk currently, as traders have two basic options. Buy now and hope for the best. Or remain patient and wait for proper entry setups.
The anticipated moves are happening as expected. Those themes should continue for the rest of this year, at least.
a Trump victory would likely have a positive impact on DTJ, TSLA, energy stocks, and cryptocurrencies, to name a few.
A win for Harris could benefit solar stocks, renewable energy companies, and big-cap tech.
For the active trader, continue to focus on leaders and high relative strength stocks and sectors while awaiting the right entries.
For long-term portfolios, enjoy the ride. Notice what’s working and what isn’t. Stocks not participating in this move is a red flag.
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The Disclosures
***This is NOT financial advice. This is NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.