TUES. NOV. 4- It's Election Day...And?

The market marked time yesterday waiting following the end of the fiscal year for mutual funds on Friday and ahead of the election today. Today may well be a bit more volatile as entities position themselves for tomorrow and thereafter election-wise. Let’s lay out the three main schools of thought here. First, if Obama won in a landslide, one of two things would happen in the big picture – speaking philosophically- for the next couple of weeks. Either literally nothing would occur as so much money has been earmarked for the bailout or Democrats would aim for New Deal II as he’d have a mandate in the Senate which would not allow for filibustering. Sectors such as healthcare, solars, and fertilizer stocks would perform well while defense and oil stocks would suffer. The market would likely trade a little lower by the end of the week. However, in the longer-run, worries over tax policy would abound as well as nervousness over inflation. Second, if Obama won, but not in a landslide, which is the scenario priced in, trading would be choppy yet somewhat directionless as, again, this is expected. The third scenario is a McCain victory. It is hard to say ‘status quo’ would rule the day, but at a minimum, there likely would be no further expansive legislation and sectors such as oil companies would do well as McCain would be much less likely to tap the reserves. In the immediate-term, stocks would likely rally initially, but eyes would be turned toward the streets as there’d likely be a lot of civil unrest which would likely disturb the stock market greatly. Now, as day traders, it matters not if any of the aforementioned predictions come to pass. However, every individual day traders simply must have a plan for trading and be quick to react if wrong. For instance, if one expects UNH to open sharply higher if Obama wins by 8-11 points and the Democrats control 60 Senate seats, and UNH does open up a little but looks to go negative, stop thinking about what should be and short UNH through unchanged. Basically, have a mental plan as to what should happen, be ready to change on a dime, and realize that day trading is not the same as long-term trading. Be very flexible yet prepared as post- election days tend to be very good for prepared day traders whereas those unprepared tend to have one of their worst days of the year.

One more note addressing today specifically as opposed to the whole focus of ‘tomorrow’ in this piece- the market tends to trade as one thinks it would on election days – quietly but the sectors acting in accordance with what the general belief will be for the outcome so for today, the market will try to price in what it thinks will happen yet the same rules already described apply. Furthermore, the market despises uncertainty so good or bad, the fact that the election seems to be over before many people vote is a good thing for the marketing the immediate-term – no matter who wins. But, if, say, solars are screaming and suddenly reverse on rumors McCain is coming closer, short them after the run-up. Basically, have a mental framework and do some homework these next two days so as to be prepared.

Prices throughout the world are up overnight- no matter the market. Look for a very strong open today followed by a very difficult trading environment as it will be very choppy, rumor-driven, and illiquid. Be careful and rely on your homework.


Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified


Good-

MA- great earnings

HIG- very strong yesterday; if market firm today, an A-B-A2 to upside with a particular focus on yesterday’s 16.84 high a likely focus

PRU, CI- will likely follow in HIG’s wake

V- will likely follow MA; if MA opens higher and V approaches unch, however, it could make for a terrific short play

FSLR, ESLR, SOLF, STP, LDK, SPWRA, TAN- solars up anticipating an Obama victory; will be in play all day today and will move with the rumored results in all likelihood as the day progresses today

AKRX- good earnings

AMLN- largest shareholder wants to push to enhance shareholder value in some way

DE, TRH, TRA, AVAV, KBR, THC- among others, all mentioned on “Mad Money” last night

ADM- good earnings


Bad-

GHM- atrocious earnings

HLF- bad earnings

GS- weak all day yesterday; if market weakens, could accelerate down

XTEX- closed near a low; very weak…looking for follow-through

LFG- huge reversal yesterday; will be very volatile today

MGA- poor earnings

MVL- raised guidance for this fiscal year, but warned badly for next year


Earnings:

TUES NOV 4 BEF

ADM AEE AMSC

DF DNR EMR

EXPD FE HCP

HNT HOC HW

JEC JOE LPX

MAC MGA MVL

MYGN NI PNW

RDC RTI TDC

TEN UNT VNO

WTI XEC



TUES NOV 4 AFT

AMMD APL BRE

CBL DEI EQY

FCH HCC JKHY

ME NHP NSR

PPL PXD SGY

VTR WTW




Good luck today.