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Election Markets

 Oil Breakout-Retest-Fail
Dollar correlation
Currencies, central banks, etc.

Oil Broke out of a year-long consolidation on 9-29-16.

oil-coil-breakout-9-29-16

The dollar followed up a week later.  As the dollar run up began, oil went in to a 3 week plateau, a holding period.

dollar-10-12-16

The downward pressure on oil and commodities created by the strengthening dollar capped the oil move, although it attempted to hold higher prices, bull flag, and set up for a move higher.

oil-dollar-correlation-11-5-16

Finally, the dollar made one further push higher on 10/20, gunning for the top of it’s channel, which would have been about 99.50.

On that day, oil began to sag, and finally started selling off in earnest on 10-31.  The dollar followed almost immediately after.

What we see, again and again, is that the dollar leads, oil follows.  The fall in oil led to a perfect set up, a retest of the breakout from late Sept.  However, the retest failed.  At least it didn’t neatly hold.

oil-retest-fail-11-4

The weakness in oil is partly attributed, theoretically according to fundamentals, to a couple of record inventory build reports.  And then there was a rumor that OPEC would yet again fail to agree in November.

But the dollar is still heading down towards that retest.  That weakening dollar is likely to bouy oil and commodities.

So likely, even though the neat retest failed, oil will probably balance in this area, which is dead center of the whole 2016 range.

oil-last-stand-11-4

And similarly, markets will probably sit here through the election, then use the next news events to get moving again.

With oil, the next news is the actual OPEC event.  The election is ostensibly an event vis a vis markets in general.  Although, the president is fundamentally irrelevant to markets, it’s sentimentally an issue.

And then the more actually important events are the central bank meetings in December.  The US Fed has long been posturing that it will raise rates.  The ECB will likely give clarity if QE will really end in March, or get extended.

A quick survey of stocks finds the SP 500 right at the mid of the up move follow the false Brexit breakdown.

es-brexit-mid

Like Oil and the dollar, it’s right in the middle, and likely to balance here going in to news.

This exact spot also happens to be exactly on top of the 2015 range.

es-a-top-2015-range-11-5-16

The Nasdeq, a broader measure, slightly more tech sensitive, is similarly poised.  Not quite as neat as a pin, but same basic picture.

nq-11-5-16

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