Election Day is here. Whether the election result arrives on Election Night is what everyone is wondering. That point notwithstanding, the futures market doesn’t appear to be suffering from any bouts of uncertainty.
Currently, the S&P futures are up 39 points and are trading 1.1% above fair value, the Nasdaq 100 futures are up 75 points and are trading 0.6% above fair value, and the Dow Jones Industrial Average futures are up 376 points and are trading 1.3% above fair value.
This positive disposition comes on the heels of a late-day rally yesterday that saved a good day from turning into a disappointing day. Led by its cyclical components, the S&P 500 gained 1.2% while the Dow Jones Industrial Average advanced 1.6%.
Noticeably, the Nasdaq Composite trailed with a 0.4% gain, as its mega-cap stocks, and other growth stocks, lagged in the midst of a calculated trade into value and cyclical stocks.
Even so, the broader point is that the broader market won its rebound bid on Monday coming of the worst week of losses since March.
That rebound bid will persist at today’s open and there is enough political spin right now to make a case from any angle as to why the market now seems to be in a good mood despite not knowing anything specific about the election outcome that it didn’t know last week when it declined 5.6%.
It also seems to be in a good mood despite similar-sounding coronavirus headlines (rising case counts and positivity rates, restrictions on business activity, increasing hospitalization rates, etc.) that were viewed as a driving factor behind last week’s selling interest.
One can say then that this rally effort is nice to see, but that it doesn’t have the deepest of roots yet since it has sprung up mostly on a belief that the market got oversold last week and secondarily on a hope that a contested election outcome will be avoided.
The latter could all change by this point Wednesday… or…. it could be validated and help loosen the soil that allows for the planting of a stronger rally effort.
There’s just no telling right now, but the gains count all the same. If the current futures indication holds, the S&P 500 at today’s open will have recovered roughly 80 points of the 195 points it lost last week, or roughly 40% of those losses.
That’s a healthy move in a two-day stretch that isn’t even fully two-days old, yet it’s par for the course for a market that has feasted on buy-the-dip opportunities.
What happens tonight is anyone’s best guess, but that’s all it is right now. The speculation phase, though, is coming to an end and new political facts will soon be presented that provide added meaning to the market’s near-term direction.
Originally Posted on November 3, 2020 – New Political Facts on the Horizon
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