As we expected, it may take a little time to determine the clear winner in yesterday's presidential election due to the complexity of counting this years's many early and mail-in ballots. Once the final counts are in, however, there may be even more delays as President Trump is openly accusing the Democrats of voter fraud. Equity markets do not normally react well to this kind of uncertainty in something as important as a U.S. presidential election, but for some reason, the broad stock market rallied strongly yesterday and today. This bullish surge is puzzling many analysts at the moment, but one explanation may be that Wall Street is somewhat relieved that the massive "blue wave" predicted by the mainstream media polls is not panning out. Even if Joe Biden wins, it will not be a landslide victory, and it looks like the Democrats will probably not take the Senate as they had hoped (and as the media pundits had predicted). In addition, Republicans gained seats in the House (contradicting most media predictions of double-digit seat losses).
Because of this delay in the resolution of the election, the market is very volatile now, and we cannot attach much significance to this two day rally. We are about to enter a strong reversal zone Nov. 5 - 19 which is actually an overlap of two reversal zones (Nov. 5 - 13 and Nov. 11 - 19) with strong potential "pivot points" around Nov. 10 and Nov. 16. We could get a strong market reversal (or more than one reversal) in this time frame. I will analyze the DOW, S&P 500, and NASDAQ indices in more detail tomorrow. We are still on the sidelines of this market.
Gold and silver prices are still flat. We will wait to see if they can move lower into this next reversal zone for a possible spot to buy.
In my blog on crude oil last week (Oct. 27) I wrote:
"Although crude is in a new medium-term cycle that started with the double bottom lows of Sept. 8 and Oct. 2 at $37 (Dec. contract chart), it may have peaked early with last week's high of $41.90 (or even the Sept.18 high of $42.02) and could be turning bearish. If prices start to fall below $37, that bearish scenario will be confirmed, and we may have to switch to a short-selling trade strategy."
It looks like this is happening as prices dropped to $33.64 on Monday. If this market is turning bearish, that does not bode well for the broad stock market. Any rally into our next reversal zone that fails to exceed $42 may give us a good opportunity to sell short. We are out of this market for now.