All the focus this week will be on who becomes the next President of the United States. The polls are tight. Half the prognosticators are picking President Obama to win, the other half choosing Mitt Romney.
ETF Stocks isn’t sure that it really matters in the weeks and possibly months ahead as far as stocks are concerned. Earnings and sales have slumped as the 3rd quarter has moved along. S&P 500 sales are underwater year-over-year, and earnings are barely treading water. If the back half of earnings season continues to weaken, then stocks could falter no matter who wins.
The three major indexes are dangerously close to the recent pivot lows. Support has to hold. Otherwise, the tape will continue to bleed. Last Thursday’s ADP Jobs report gave bulls some hope, only to see the gains wiped out on Friday, despite 171,000 new jobs.
It has to be concerning for investors to see sellers overrun buys s quickly. Typically, we want to see a follow-through day after a major gain during a downdraft. In order for a new uptrend to take hold, the number of buyers will have to outnumber sellers. As long as sellers are in command, investors would be wise to step out of the way until the knife sticks in the cutting board.
Where might that be? The NASDAQ remains perched on its 200-day average. If the index can’t hold 2,979, then ETF Stocks can envision 2.900 in the NASDAQ’s future, maybe even as low as 2,850. With momentum turning negatively, ETF Stocks feels the odds of the stocks losing ground in the week ahead is better than 50%; although, the election is a wildcard.
Like a middle-linebacker watching his keys, investors need to watch the NASDAQ’s 200-day average. A close below the key buy/sell trend line and all the indexes are likely to shave more off. Since the S&P has held up the best, money could be made on the short side of the market.
ProShares Short S&P500 (SH) seeks daily investment results that correspond to the inverse (-1x) of the daily performance of the S&P 500. Translated into English, it means if the S&P 500 drops 2%, then SH should gain roughly 2%.
Good luck in the week ahead and make sure you get out and vote today.