- New Science in old markets -

Equities drop through compressions. Those pesky US elections

Yesterday the FTSE fell down through the compressions reported last week and that means you should now be short:

ftse-daily-comps

US indices have also moved down below compressions lately, the most recent of which was in the Nasdaq 100 two days ago:

nasdaq-100-daily-comps

Mainland European indices have also dropped but there is some support around here from some older compressions, as shown in this Eurostoxx chart as an example.

eurostoxx-comp-update

Because of this support area in Europe we are not advocating a 100% short equity market posture here but we may do in the next few days if there is some rally (perhaps led by Europe) that also takes the US back up to those recently-broken compressions. Regular readers will know that we usually prefer to take a trade when a market returns to a compression rather than to jump in as soon as that compression has broken. So it is here, but it is prudent to have some shorts on as the return doesn't always happen. The FTSE is our preferred candidate as we wrote last week.

The Election

The failings of both of main the candidates for US president have been raked over at length so we will not re-hash them here but we have one observation. The people feel they know Mr Trump and we can credit his outspoken habits for this and his (to American ears) odd sense of humour. When he makes an ironic remark, it is taken as his genuine viewpoint. Nothing that emerges in the next few days will change the public's opinion of him much, even if it is apparently bad for his reputation - he has not tried to portray himself as something he is not.

Mrs Clinton is different. She has a carefully crafted public persona and has a core following among those who like her politics. She is not good at projecting warmth so that core is small and she depends on it being able to carry the wider Democratic party constituency along to get her the votes she needs. Even Democrats don't like her much but they like her a bit more lately after Trump's strong personal attacks which she has withstood with dignity. A courageous victim is not a typical American role model however and this newfound liking is volatile. Any more revelations that emerge to remind people of the ghastly behaviour of the Clintons while in office will damage her much more than any more allegations about Mr Trump will hurt him. There is much more that could be written about the misdeeds of Mr and Mrs Clinton but it may well be that the resurfacing of the 'pardon for cash' allegation concerning the fugitive financier (and founder of Glencore) Marc Rich is enough to damage her enough. A beneral widespread reflection on the enormity of this act should be enough to cause her support to shrink a great deal.