Nasdaq Rally Pauses as Trump Contests Election Votes for Biden

NASDAQ PRICE OUTLOOK: STOCK MARKET STILL VOLATILE AS TRUMP CONTESTS ELECTION RESULTS POINTING TO BIDEN PRESIDENCY

• Nasdaq exploded almost 10% greater this week as shares soar within the wake of the US election
• The tech-heavy fairness index has began to slide from latest highs as Trump refuses to concede
• Inventory market volatility may linger owing to the chance of a contested election, COVID-19 fears

The Nasdaq has staged a large rally over the previous few buying and selling periods within the aftermath of election evening. With challenger Joe Biden wanting set to assert victory over incumbent Donald Trump, and prospects of a cut up congress squashing fears of upper company taxes, buyers have pushed main inventory indices notably greater this week. Nasdaq value motion surged nearly 10% from final Friday’s shut whereas the S&P 500 and Dow each gained about 7% a bit. This coincided with a sharp slide within the US Greenback and breakout in gold costs.

NASDAQ PRICE CHART: DAILY TIME FRAME (07 JUL TO 06 NOV 2020)

Chart by @RichDvorakFX created utilizing TradingView

Nonetheless, the tech-heavy Nasdaq is beginning to stall as President Trump refuses to concede regardless of election votes tipping the scales towards him throughout key battleground states, equivalent to Georgia and Pennsylvania. Biden profitable electoral faculty votes from these states ought to solidify his presidential bid, however lawsuits filed by the Trump marketing campaign may drag out the official election consequence and trigger uncertainty to linger.

Nasdaq value motion additionally appears to be struggling at its bearish trendline prolonged via the 02 September peak and decrease swing excessive notched on 13 October. This space of technical resistance is underpinned by the 78.6% Fibonacci retracement stage of September’s selloff as properly. That stated, if the seemingly unwavering bid beneath shares can push the Nasdaq above this technical barrier, there could possibly be alternative to increase towards all-time highs. One other market growth that factors to potential for the inventory market to maintain climbing greater consists of latest shifts in retail dealer positioning.

S&P 500 INDEX PRICE CHART WITH IG CLIENT SENTIMENT OVERLAID: DAILY TIME FRAME (01 JAN TO 06 NOV 2020)

In line with the newest IG Consumer Sentiment figures, retail CFD dealer information reveals 33% net-long place for the S&P 500 Index. Current shifts in positioning element that the variety of S&P 500 merchants net-long declined by 25% whereas the variety of net-shorts spiked by 30% week-over-week. Seeing that we sometimes take a contrarian view to crowd positioning, the mixture of present net-short sentiment and up to date modifications in positioning may sign a comparatively stronger bullish contrarian buying and selling bias. Nonetheless, there are appreciable market dangers on the horizon that might catalyze one other risk-off transfer.

Most distinguished, apart from contested election danger, consists of the risk that mounting coronavirus circumstances poses to the financial system. FOMC Chair Jerome Powell acknowledged throughout Thursday’s Fed resolution press convention how the latest course of the pandemic is of explicit concern, including that customers may pull again on spending on account of fears of the virus. Hopes for passing an awesome stimulus invoice may additionally weigh negatively on shares seeing that odds of a democratic sweep have dwindled. Correspondingly, it could possibly be prudent to maintain shut tabs on the S&P 500-derived VIX Index, or fear-gauge, as a possible bellwether to danger urge for food and the place shares may head subsequent.

— Written by Wealthy Dvorak, Analyst for DailyFX.com

Join with @RichDvorakFX on Twitter for real-time market perception