It looks like the U.S. presidential debates are going to add more volatility to an already highly volatile equities market over the next several weeks as we move closer to election day on November 8. Politics aside, Wall Street does not like uncertainty, and in this presidential race Hillary Clinton, an establishment politician with a long history in political office, is a known quantity whereas Donald Trump, a political newcomer, is an unknown variable. This likely explains the fall in equity markets over the last several days as Trump seemed to be gaining on an apparently sick Hillary in the polls and also would explain today's strong rally after last night's debate in which Hillary gained back some points as she seemed polished, well prepared and completely recovered from any illness she may have had. (The polls today seem to be mixed as to who won the debate.) Note that I am not trying to support or discredit either candidate here but merely identify how financial markets are reacting to them.
The lows of Sept. 14 are still holding in the DOW and S&P 500 so equity markets could turn up now and start a strong rally into the election, especially if Hillary's support increases. If those lows start to break, however, we may have to change that bullish view. We still need to keep in mind that resistance in the DOW at 18,450 which needs to be broken before we can get too bullish. Still on the sidelines of this indecisive broad stock market.
Our bullish stance on gold and silver was challenged today as both metal prices dropped. Gold is still holding well above our stop loss point of $1,300, but silver dipped briefly below $19 before closing back above that line which was our second stop loss point (after $19.50). Silver has now broken below last week's low while gold hasn't (yet) so we have a case of intermarket bullish divergence (as long as gold doesn't go below $1,309). We are also entering a potentially strong reversal zone specifically for gold and silver from Wednesday through Friday and prices are falling into it. For these reasons I am going to hold on to my long position in both metals as a reversal up could be imminent. We may even tolerate silver falling below $19 as long as gold remains above $1,300 (but we don't want to see silver go below $18.40).
Crude oil prices shot up after we entered a long position early on Monday but are back down today, We are holding above our stop loss point around $44 (November contract chart). A subcycle bottom is due by the end of this week unless it already happened last week at $43.06 (very possible). If prices can stay above $43.06 through Friday then we should see crude start to rally. Holding my long position in crude.