Will the markets sell off after November 7, 2006?

[BDGBDG]

Quote from Maverick74:

Again, sometimes I feel like I am the only guy on ET that has been trading for more then 12 months. But here it goes, let's step into a time machine and go back to 2004. Yeah, the good old days. We had ourselves a very strong rally in the fall. Now before you say big deal, I'll tell you what the big deal was. It was an election year!!!! Not just any election year, but an election that would be extremely controversial being that we were in the middle of a very unpopular war. And after the whole fiasco in 2000 about the election being so close, everyone figured we would see more of the same.

Well the market continued to rally strong going into the election. Again, all the leftists said it was the Bush administration propping the market up and we would sell off hard after the election. So everyone starting building their short position for what looked to be the mother of all shorts.

Well, election day came and everyone was right, it was very controversial yet again with a close vote with Ohio being the tiebreaker. And what happened after the election. Did we sell on the news? Nope, we took off like a rocket. Why? Because everyone wanted Bush to win? Nope. Because everyone was short!!!!! We took off straight up and never looked back. We sold off a little bit in Dec and then went sideways before going higher.

The bottom line is, everyone is keying in on these elections to get short. Not because they know who is going to win control of the House or Senate, but because it represents a catalyst after a huge runnup. The problem with the short trade is there is no edge there to be had. Everyone is keying in on the same trade. No one is going to want to get long after the elections. The right trade is usually the hardest one to make.

OK, after all this rambling, here is my prediction, I say we rally hard after the elections. The Dems win the house, the Reps keep the senate. We sell off in Dec into the end of the year and through the end of January. Just one man's opinion.

History will repeat itself, but which history. Why can't the 2000 post-election market selfoff serve as a model for this upcoming election? Personally, I think election results and news in general will have very little effect on the markets. The market will do what it wants to do. If it wants an excuse to selloff, it will interpret the results accordingly, regardless of what happens. Today, the Saudis announced a major terror threat to their oil supply, yet the price of oil fell. Why? Because the market wanted to go lower.

With that being said, whatever the market does up to the elections, the elections will serve as a catalyst to reverse the shorterm trend and then the market will continue to rise until the fundamentals change.

 

[forex-forex]

Quote from BDGBDG:

Whatever the market does up to the elections, the elections will serve as a catalyst to reverse the shorterm trend and then the market will continue to rise until the fundamentals change.

This is my view also, and the reason I started the thread. Buy on rumour, sell on news and the news is the mid term elections.

DIA puts are very cheap now.

 

[BDGBDG]

Quote from Dr.Greenback:

I say the market doesn't begin a significant downtrend until after the first formal announcement of troop withdrawal from Iraq begins.

IF, having the Dems takeover the house/congress next month is the beginning of this process then market tops will begin to form.

Yeah, this market is looking for an excuse to selloff. Everyone knows the rally is not sustainable. I do not know about all the greek theta beta alpha shit, but I know an overbought market when I see one.

 

[NanoTick]

Quote from forex-forex:

Will the markets sell off after November 7, 2006? I'm thinking of going overboard with the DIA Puts.

It depends on the outcome of the election...

 

[shortie]

the market might just decide not to wait on the election outcome. what if it falls under its own weight before Nov 7?

 

[putzzytheclown]

Quote from BDGBDG:

the market will continue to rise until the fundamentals change.

What fundamentals?

You mean the key numbers the govt. put out and then quietly revise down 2 weeks later?

 

[scriabinop23]

Quote from putzzytheclown:

What fundamentals?

You mean the key numbers the govt. put out and then quietly revise down 2 weeks later?

well wait until the revision, then go short when you see a signal... I looked at those GDP numbers and it spells the following picture to me:

1) relatively strong economy (minus housing) - and while the housing component is a large burden on it, anyone who didn't expect the housing burden is a fool. furthermore, those surprising new housing sales #s from before might offer a floor this. I still think housing will correct another 20-30% in the next 5 years, but my point is perhaps home builders will be aggressive and keep the housing market going by aggressively lowering prices and keep inventory moving. And as long as wage growth continues, there is a relative foundation to this housing market. Perhaps by next yr you'll see positive qtr over qtr #s on the residential property side component of GDP. Once you see this, off to the races again.
2) weakening dollar pressure (export balance component) - provides economic stimulus to us...
3) strong personal incomes - the foundation of support for continued spending and prevention of total collapse of anything.
4) questionable autos component (because so much inventory in 3q was cleared with one time incentives/etc)? this part alone made GDP growth look like 1.6 instead of 0.9. I'll be devil's advocate and say the 1.6 could be solid on the basis of oil continuing to be cheap. If oil stays cheap, American SUV sales will stay. Just call your local Toyota dealer. They have a record # of Prius' on the lots. People are back to their old ways.

So conclusion: hedge your long S&P futures with long oil contracts. Because fundamentally expensive oil leads to lower spending power (=lower wage): housing and cars are the first to go.

I'm waiting for the day of negative personal income growth and pricy oil - thats a short signal. neither are here right now, and that is why the markets are going up.

Also - I think the markets won't notice a democratic landslide (in the big picture, maybne you'll get a one or two day selloff) -- everyone is already expecting one. Its priced in. The very existence of this thread is proof.
PS: I take my arguments off the table if new home #s and GDP #s are revised downward after elections.

 

[harrybachs]

A wise man once told me "if the markets don't go down, they will go up".

 

[Comptalk]

I would think that even if the Dems win the House and the Reps keep the Senate the market would react in a positive move. The Dems would not be able to repeal the tax cut; thus everything should stay the same. Gridlock, for a better word, is good for the market. Nether side can take advantage of the other.

 

[Landis82]

Quote from Maverick74:

Again, sometimes I feel like I am the only guy on ET that has been trading for more then 12 months.

And let me guess, you continue to spend everyday of the week posting on ET because you feel like a Veteran trader and it helps feed your insecure Ego?

How absurd.