Its Over, page-389

Originally posted by 1ronnie

The Russell 2000 is the US index representing ********* stocks- looking at the long term chart below, you can tell we're in bubble territory and a bigger correction than the one we've just had is likely to be ahead of us. From the depths of the GFC which saw the index plunged to 400 points it has risen 4.35x to a high of 1740 reached on 31 August 18. 

The US midterm elections is tomorrow and this one will be close. Most polls show Democrats holding the edge for the House and Republicans retaining the Senate. Republicans holding both would be bullish and offers the best outcome for stocks while Democrats winning both would probably be a surprise setback the market has not factored.

It would not be surprising to me if Republicans continue to hold both in razors edge contest that could see final results not known for a few days..and eventually vindicate the Trump brand of presidency , further emboldening him. And that could pave the way for a year end Santa rally!

However, the market will divert its attention to a new geopolitical risk- the Iranian oil sanction takes effect from today when US navy would blockade ships that buy Iranian crude. Russia, China and India have warned that if US applies the navy block, they will break the siege with military force and Iran adds that if they cannot export oil nobody in the Persian Gulf will be able to export either because they will close the Strait of Hormuz...The casualty will be an oil spike and if unchecked could hurt and derail the world economy. If this becomes serious, then we kiss Santa rally goodbye even if Trump wins.

So perhaps one risk less and one risk more if Trump wins and at worst, two risks.

I think there may be selling into any rises from here. A Trump double win could spark a short term panic buy for a day or two , then normalises and attention is diverted to Iran, rising rates in Dec and the FAANG stock performance.

In short, there is only one certainty and that is uncertainty.