Election Day Madness

With the election results on the horizon, markets have seen additional volatility in the intraday price. Due to the effects that different political parties may or may not have on the market, big money on Wall Street has been positioning itself accordingly. Statistically, the market has done better after the midterm elections than in the days before receiving the results.

Morning hold of 3,800 leads to a rally

The day began with some profit-taking after an up-and-down overnight session. Indexes began to trend lower, but the selling volume was insufficient to keep the market down. By the end of the opening hour, the market had found some support above the psychological level of 3,800. 

After holding 3,800 for most of the morning, buyers stepped in to carry the market higher, stalling around 3,865 on the S&P 500 futures (/ES). During the lunch hour, the market started to trade sideways, ultimately setting up a sharp downside back to key support at 3,800. 

The rest of the day, the rollercoaster-like action continued. There was another solid run to the upside to 3,850. 

Markets capitulate into the close.

To end the day, the market rolled over one last time, selling off for another 25-points into the closing bell. The Nasdaq and the S&P 500 were positive to close the session. The S&P 500 closed up 0.54%, gaining 20 points, while the Nasdaq closed up 0.46%, a gain of 48 points. The Dow followed, closing up 1.02%, adding 336 points.

Targets for the second half of the week

Targets on the upside (on /ES) heading into the next couple of trading sessions are today’s high of 3,867 and 3,900. Above 3,900 is 3,928. This was the high of last Wednesday before Federal Reserve (Fed) Chairman Jerome Powell spoke. 

On the downside, the first target is 3,800. Below 3,800 is the 21-day exponential moving average (EMA) at 3,780. If the price falls below the 21-day EMA, the potential of a rally will become less probable. 

Using key levels to decipher big money

It’s important to recognize that key levels, such as 3,800, often serve as strong areas of support or resistance. This may indicate that institutional money, aka “big players” on Wall Street, are also using these levels. We want to trade with big money on Wall Street, not against it. Traders should consider these levels when setting up trades.