Invest at election time? Better to sit this one out

With all the uncertainty, and likely volatility, there are no safe bets right now.

By InvestorPlace Nov 6, 2012 1:13PM
People putting political symbols in box copyright Comstock Images, Getty ImagesBy Serge Berger

iplogoWith the end of the U.S. presidential election within reach, I have received a dozen or so emails asking me how to trade the market over the next few days. I have just one answer:

Unless you must trade by mandate or have an incurably itchy trading finger, sit this one out and let the elections come and go before putting your hard-earned money at risk.

As I often say, technical analysis is best used when pinpointing reference levels rather than blindly trusting any given indicator. This becomes immensely more important when we enter periods of significant uncertainty -- such as, say, a presidential election. And, for what it's worth, fundamental analysis also will be of limited use in the coming days.

Instead of analyzing stacks of statistics on market reaction to the past dozen elections, I will simply say that markets should be volatile, trading at least in a choppy range until a couple of days after the election results. And even then, remember: What matters more than the news itself is the reaction to the news.

So rather than seek trades you can't count on, the best thing to do right now is go back to basics -- namely, get a hold of the broad trend in the S&P 500 and don't forget it during potentially choppy days ahead.

Click to Enlarge

The S&P 500 Index's sectors currently are in a consolidation phase. None of the sectors are showing any major damage, though utilities are under more pressure than most others, especially cyclicals. Outperformance of cyclical sectors is a bullish sign.

Click to Enlarge

The S&P 500 Index (INX) itself is simply consolidating some of its large gains since June. Next support levels are near 1,395 and 1,370, which are the respective 38.2% and 50% Fibonacci retracement levels of the June-September rally.

So for the coming days, please keep in mind that most analysis -- technical or fundamental -- will be of limited use until the election results have had time to sink in.

Until then, remember the broader patterns of the S&P 500 ... and try not to follow every tick, headline or rumor.

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.

More from InvestorPlace
Nov 6, 2012 1:31PM
Correct, we could re-elect a socialist.   This would be very bad for anyone in the markets.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

125 rated 1
264 rated 2
485 rated 3
679 rated 4
640 rated 5
617 rated 6
632 rated 7
493 rated 8
276 rated 9
153 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.