Election Day Gives the Market Pause

Pre-market futures are flat, which is just what I would expect ahead of Election Day. What traders don't want to see is Election Day turn into Election Week, which turns into Election Month.....

As important as the elections are, something else is going on that is not getting reported correctly. The LIBOR, or the real cost of borrowing dollars for a 3-month loan has dropped another 17bp to 2.86%, which is the lowest level since Lehman imploded in the middle of September. The overall drop is being reported, and the relationship to the Fed cuts last week is being reported, but the biggest key to the drop is that the LIBOR is starting to move a bit in conjunction with the Fed target rate activity. The LIBOR reacquiring the Fed is a good sign, it is one more indication that traders think the worst of the Financial catastrophe may be behind us, at least for now. No one knows what tomorrow will bring, but traders are speculating at least that it won't bring us multiple bank failures anymore.....we shall see.....

Big Money will now focus almost exclusively on the U.S. elections. Today will probably be a narrowing range, consolidating type of day, which will probably continue into tomorrow. It's possible that the outcome of the election will be easily forecasted beforehand, but it's doubtful, so traders may not do a whole lot today into tomorrow mid-day. As always, a news bogey can change that, especially one that is predictive of the election outcome, but outside of that I'm not looking for a huge move. I am flat everything in my "paper" trading account and I will probably only nibble here or there for the next 1-2 days, and that will only be on a clear intra-day signal or range breakout. Otherwise I will just sit tight and watch the elections unfold.

8:00 am MT: We got our first bad news bogey of the week as the ISM Manufacturing Report came out considerably worse than expected. The news shouldn’t be all that surprising, but it will probably keep some pressure on the markets this morning. I nibbled on some QCOM puts a few minutes ago. Other than that, I’m not that inspired by the price action out there. Railroads look interesting for calls (BNI, CNI), and I’m still watching the stuff I “paper” traded calls on profitably last week (AMZN, AAPL, RTN). Energy is also interesting, but only DVN looks good to me this morning for a call. I’m kicking the tires this morning but I’m not a serious buyer of puts or calls.

4:00 pm MT: Market Wrap: Today was definitely a pause day. There was a whole lotta nothin’ going on. Traders are absolutely waiting on the election outcome before they decide whether they are buyers or sellers. The ISM was barely a blip on the radar. The good news is that oil dropped today. The longer oil prices stay down the better for the economy.

I dabbled with some QCOM puts for a small 9% gain on the day. I just didn’t do much, although there were a few movers and shakers here and there.

Technically, there isn’t much new to analyze today. I may play around with puts if the Dow drops below the low of today during the day tomorrow, but even that isn’t a sure thing. These kind of conditions don’t lead to really aggressive moves, so even a move below the low of the day won’t necessarily lead to a downswing. It may be that the election race will be “decided” before the market closes tomorrow, but I very seriously doubt it. Therefore, I expect tomorrow to be much more of the same as today.