Timing the breakout

EUROPEAN OUTLOOK

07.34

The stalemate in European equities drags on. These periods are trying, but it is important not to try and force trades where none really exist. The only approach in these conditions is to try and catch the markets at intraday extremes, i.e. when they are overbought or oversold on their hourly charts. When they are in the middle of their ranges, it basically becomes a coin-flip, which is not for me.

As to when the next significant move will become, I look partly to time-cycle analysis. The 38-day cycle in the DAX is due to turn around 13 November. If the German index picks up in that timeframe, I would regard it as an especially good buying opportunity. My big-picture view remains bullish.

Click here for analysis of the European markets.

COMMODITIES OUTLOOK

09.38

Were Mitt Romney to win the election, it is thought that tighter monetary policy may ensue via rising Treasury yields. This would likely be dollar-positive, and therefore negative for gold and other commodities. For what it’s worth, I see an Obama victory as very likely indeed and regard the “close race” chatter as journalistic hype to maintain interest in one of the US media industry’s most important cash-generating events. However, this is not the same as saying that commodities will necessarily immediately bounce following the election. A bigger rally in gold is coming, I believe, but we may have somewhat longer to wait. For now, my bias remains slightly bearish.

Click here for analysis of some leading commodities and EURUSD.

WALL STREET OUTLOOK

12.48

A Romney victory today would be better for Wall Street, at least in the near-term. As Barclays Capital’s Technical Strategy team have shown, stocks have tended to favour Republican Presidents in the first year after an election, with the biggest performance difference coming at the three-month stage. A Romney victory might reduce the risks of a damaging showdown over the fiscal cliff, although not entirely. However, I do not envisage Romney taking the White House today. This should be slight a longer-term positive for stocks, as the incumbent is marginally less likely to trigger World War III than the challenger.

I am assuming the recent correction to be still in progress for now, and seek small shorts in the Dow and Nasdaq 100.

Click here for analysis of the US indices.

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