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Trading the Elections Day

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In about few hours the American voters will go to choose between bad and worse (please excuse me my American friends). From the way that the markets reacted to yesterday’s FBI news we learn that the markets want Hillary.

Was yesterday’s 2% rally in the S&P 500 just a preview to a democratic win?

Or was it just a short term relief rally? A rally that started from the strong daily support zone I mentioned in my previous analysis (2080-2100) following last week’s declines.

SPX analysis

Previous bearish setup – Reached final target

In this blog post I’ll bring you the recent analyses I’ve made on some of the key charts that you should follow on elections day.

Now whether or not you should trade the elections it’s up to you and your risk tolerance.

For me, it’s kind of a gamble…Here’s what I had to say about trading the elections as was recorded and snapped on my Snapchat account (add me – @marketzone):

S&P 500 – Approaching a daily resistance zone

With its rally yesterday, SPX closed above 2100 again and also above its Fast MA line:

spx analysis

The strong reaction to the 200 days MA line teaches us that the buyers haven’t given up yet and that they are just looking for good dips to buy.

Does it mean that we are heading towards a new record high following the election? Year End Rally?

Maybe… but SPX will have to overcome the 2150 resistance zone (2140-2160) to make such bullish fantasy come true.

The Bears should focus on the 2150 resistance zone. It includes the following elements:

  • 3 trend lines – All should act as resistance
  • Daily structure zone – The bottom of the previous trading range (2140-2180)
  • The 61.8 Fibonacci correction level

The bulls that bought the 2080 should probably protect their profits. The next thing would be to wait and see whether or not a positive result can drive $SPX above 2160 and towards previous record highs – 21800-2200 – The next bullish target zone.

$DXY – Can the Dollar Index finally hit 100.

Another financial asset that enjoyed yesterday’s FBI-Hillary boost was the Dollar Index.

Dollar Index analysis

Dollar advances towards 100$?

The Dollar Index rallied also from a support zone that I mentioned in my previous analysis (see DXY analysis on TradingView) and yesterday it stopped just below its Fast MA line.

97$ proved itself as a support zone and now in order to get to 100$ DXY will have to overcome the 98$ resistance level.

The bears should focus on the 98$ level (resistance). Stop loss for bearish trades should be at least above previous high – 99$.

The bulls can try and trade the breakout (if an when DXY will break above 98$) and mark 99$ and 99.5$ as two potential target levels.

The most interesting trading scenario for me will be if DXY will make it to the 100$ resistance zone – Weekly triple top, daily harmonics and a huge psychological level are pretty good reasons to look for bearish entries and bet against the Dollar.

 The German DAX – Consolidation below a bearish PRZ

How will the U.S elections affect the European markets? Perhaps the German DAX can provide a clue.

Although the DAX exploded 2.5% higher yesterday, signaling the Europe also prefers Hillary over Trump, the German Index is still below major weekly resistance zone as you can see below:

German DAX analysis

Still inside harmonic pattern – DAX

The nearest resistance zone for the DAX is 10,500-10,600.

If it will overcome that Price Zone than it will probably advance higher towards the next resistance zone – 11,000 – The completion of a bearish Gartley pattern.

If it’ll fail to overcome 10,500 the DAX then will continue lower towards the 200 days MA support line – The first target zone of my previous bearish setup.

In my opinion, it is better to wait for the DAX to reach one of these two price zones before taking action on the German Index – 11,000 as potential Sell Zone and 10,000 as potential Buy Zone.

XLF – Butterflies everywhere

In my latest newsletter I covered the different U.S sectors and mentioned that XLF looks like the most bullish sector out there these days.

Yesterday XLF confirmed my assumption by climbing more than 3% after hitting the MAs support zone:

XLF analysis

Still bullish – XLF

There are two harmonic patterns I’m monitoring towards the next FOMC meeting (not talking about the elections):

  • Bearish Butterfly that completes right inside the 20$ resistance zone (blue box)
  • Bearish Butterfly that suggests that XLF is heading towards a new high – 21.5$

The target for the first bearish scenario is the 200 days MA line and the support zone near 19$.

The target for the second harmonic pattern (21.5$) is the same target but the difference that in such scenario 20$ should be included as potential target zone as well (as it will turn to a support zone).

GLD – Gold on a cross roads, waiting for the Dollar

Since hitting the completion zone of its AB=CD pattern near 130$, GLD declined 10$ and closed below its weekly 200 MA line.

Last week, due to the Dollar’s weakness, GLD managed to recover some of its losses and closed back up above the 200 weeks MA line… but it didn’t last long – Yesterday GLD tested the same line again and closed below it:

Gold analysis

GLD weekly chart

If I’ll zoom into the daily chart you’ll be able to see that the 200 days MA line is the nearest supporting element for Gold:

Gold analysis

GLD daily chart

Now it depends on your view about the Dollar:

  • Weak Dollar after the elections will send GLD higher towards 126$ to test the PRZ of a bearish Gartley pattern (see above)
  • Strong Dollar will send GLD below the Fast and 200 days MA line and towards next major support zone – 118$

In either way, Gold will probably remain within the 118-130$ range till next FOMC meeting – A much more critical economic event for the U.S Dollar.

Summary:

As I said in my Snapchat video, trading the U.S elections and trying to predict the markets reaction to the elections results is a pure gamble.

If you are a day trader or a scalper you can enjoy and profit from the intraday volatility and price swings… if you are willing to accept the risk

If you are a swing trader or an investor, it is probably better to stay away from the market today and let the dust settle before your next trade.

As Paul Tudor Jones said (See quotes and insights from the best traders) – Think about not losing money first!


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