Stock index, chart, technical analysis
Now that the election is behind us, we can draw a few conclusions. For the majority of the year our socionomic work represented itself very well in this election season. The stock market has been up the majority of the time President Obama has been office. That made him the favorite to win. The one fly in the ointment he had although he didn’t know it was the time window in October reversing the flow of equities which enabled the challenger to catch up. If you were looking carefully the tracking polls went very close to market activity. At the end of the day, socionomics is not supposed to be a point spread. The fact the market bounced in the handful of days after the storm should not have had any influence on the outcome.
All the other factors did. We don’t do politics here and Mr. Romney may be a fine man but the Republican Party has a serious problem representing not only the center of the country but leaving out vast groups of people important to winning any election. These days, it’s impossible to win without the Hispanic and women vote of which the GOP had neither. I know half the country is thrilled while the other half is angry. Half the country will see the direction move in their way while the other half thinks the country is headed for socialism. I don’t buy that for a minute because while the government probably did over reach on health care that’s not what the GOP is crying about, really. They want their capitalism and cake as well. Sorry to remind folks that unbridled capitalism led to the disaster of the last decade and the government had to be the backstop of last resort to keep the ship from going under. If that’s socialism, so be it. This country did very well through a World War and 2 great periods of prosperity under Glass-Steagall. Nobody called that socialism.
Let me say it’s not the end of the world because Obama won and it wasn’t going to be end of the world NO MATTER WHO WON.
Has anyone thought what would happen if Romney did win? It’s a fallacy to think he would have balanced the budget and the GOP is very disingenuous to run on a platform of balancing the budget. There is no such thing as balancing a budget in hard financial times. Bill Clinton likes to talk about his balanced budgets but he was the beneficiary of a great economy off the Reagan years and a continuation of good times in the 90’s. When Roosevelt gave into budget hawks at the 36 election the outcome was Great Depression II in 1937. That’s what happens in times of forced austerity. Austerity is just another word for a poverty mindset and nothing good ever comes from it, either personally or collectively.
Earlier this year France rejected austerity by putting in a new President and how has the austerity in Greece worked out? They have just about the highest suicide rate in Europe. See, nobody talks about these things. It’s very nice for some talking head to go on the tube and preach austerity from his cozy perch in a studio in mid-town Manhattan which by the way due to the storm isn’t quite so cozy anymore.
But let’s use a sports analogy to give you an idea of what austerity is and how it affects an industry. . Let’s look at an industry which is slowly going down the drain due to thinking austerity is the solution to mismanagement. Yes, I’m talking about the NHL lockout. In the Sunday New York Post, hockey writer Larry Brooks characterizes what would happen IF the players accept the terms of the owners as it stands right now. Right now the salary cap for the 2013-14 season would be set at $59.4 million. That’s not this year, its next year. What that means, according to Brooks is most clubs would have no means to sign the approximately 250 players whose contracts are due to expire at the end of this season. That means Boston would have $6 million to fill 8 roster spots; Chicago would have $2 million to fill 6 spots; Vancouver would have $4 million to fill 10 spots; Philadelphia would $2 million to fill 7 spots. Do you get the idea? Excellence would be thrown out the window and the quality of the product would go down the drain. You may not care about hockey. But institute this system in basketball and the results would be the same. The names might be Rangers, Black Hawks and Bruins but for all practical purposes it could be the Packers, Lakers or Dallas Cowboys if the other leagues instituted the same system. In government we have different names like education, defense spending and police. Those vital now and future services all get slashed to bits in an austerity program. You think it’s not safe to go to a movie theatre now? Just continue to downsize vital services. Slash education? Aren’t the kids in Asia already beating the pants off our kids?
I’m not particular coming down on the GOP, but what I am saying is this was an election where neither side had the solution and just because the incumbent won do I think the next 4 years will be terrible. Sure we are going to have to deal with Obamacare and those unintended consequences but if you are going to be honest about it, the future is what you make of it and no matter who won the country would go on. It always does. Those telling you because Obama won it’s the end of the world perhaps need to develop greater confidence in themselves to realize life is what you make no matter who is in the White House.
Next page: How banking held up
Banking was holding up pretty good until Wednesday and for those who think the market sold because O won, the market can do really well under a Democrat so that’s why we don’t buy any of this socialistic mumbo jumbo. What people don’t like is the dynamic didn’t change. It’s the same President, with the same fight with the same Congress. Besides, markets were looking for an excuse to sell. Don’t get me started on the VIX, which can’t get above 20 and for the life of me I can’t abide the complacency we have in this market. If people think it’s going to sustain from this level, it’s just not going to happen. For the first time we have some technical damage. To this point tech was leading to the downside but the banks get involved, it becomes a problem.
For the chart of the week, we have a very good read on overall conditions. The SPX was in a potential ending diagonal wedge formation. As you can see, when we have the connect the dots line from the 2011 low and the earlier one this year we are testing that area right now. If it breaks, chances are that’s the high for this year and well into the first quarter of next year to say the least. But if that rising line holds, we can still see one more high for the 2012. This is November and we are going to have a Santa Claus rally, we always do and that’s why we’ve been down in a semi-hard way. But even with the sour taste of the same dynamic in Washington, its only one day and the VIX still isn’t anywhere near the fear levels I need to be confident in a lasting bottom. We have not had that wash out kind of day where everyone gets the feeling it’s never going up again.
Why might we get a low this week? With our new technical addition which I’ll just call Quantum Thinking for right now the US Dollar has backed off and surged ahead towards a larger degree attractor line to put us in a target zone in the 81 handle. Now it is starting to form its own intraday wedging pattern. I’m looking for moderately higher prices so at the end of the day it’s feasible the Greenback could top this week. That would allow us to see a new high in the SPX. However, it doesn’t have to happen and this weekly SPX chart is a good benchmark. Seriously, with the way the banks are behaving right now, it doesn’t have to turn around. It could very easily violate here and give us a hard drop into the Thanksgiving time frame before the holiday euphoria starts to kick in.
