And, exhale! The U.S. midterm elections are over, removing a big uncertainty overhang from the stock market.
Now that the ballots are in, it’s time to see if Tuesday’s dramatic results changed anything in the charts that won’t simply be gone by the next news cycle.
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It is very important to realize that most often, the first reaction to an event like a U.S. election is not the lasting one. That’s why I let the charts be the judge.
To avoid getting sucked in by the relative quirks of daily charts, I opted to focus on weeklies. When I do, international equities appear to be getting warmer. Thank a likely weaker U.S. dollar ($DXY) for that.
Here’s the iShares MSCI India ETF (INDA). The Indian market would seem to be a logical beneficiary of a reversal of some of the international commerce disruptions (a.k.a. tariff policies) we’ve had for nearly two years. It is still in a downtrend, but another few percentage points higher, and this could go.
www.barchart.com I’ll flip back to the daily chart for the Invesco KBW Bank ETF (KBWB), since that time frame is more relevant here. That’s because it is already on the move, with the percentage price oscillator (PPO) indicator just crossing into positive territory.
www.barchart.com My biggest “beef” with many market sectors these days is not that they lack upside potential. This one has it. But how much? Perhaps to the all-time high of $100.
That’s barely a 10% move from here. With macro risk still very high, how excited can I get about a 10% rally with above-average risk? Not very.
The other factor, which is increasingly front of mind for me in my research, is that financials, REITs, and dividend equities in general might only be getting a bid for now because U.S. Treasury rates are falling.
If that’s the case, I can just own something bond-like. I have low trust when it comes to equities.
On the opposite end of the spectrum post-election, tech looks rough to me. And the GX Cloud Computing ETF (CLOU) looks even rougher than tech generally. I don’t care if this “bounces.” I won’t touch a chart that looks like this.
www.barchart.com One big up day is nice, but to be expected following a “change” election. The best path to me is to remind myself as I often do, “no sudden moves, Rob. No sudden moves!”
Rob Isbitts is a semi-retired CIO, former fiduciary investment advisor, Barchart columnist, and straight-talker. Download his new free e-book on hedged bond investing for retirement at ETFYourself.com. His research and model portfolios are at ROAR.PiTrade.com.
On the date of publication, Rob Isbitts did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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