Weekly market outlook 11/3
Donny strikes back??
Hello traders,
Hope you had a great weekend and wishing everyone a Happy Diwali to whose celebrate.
Last week we finally saw some downmove on NQ and ES and now the markets are holding their breath for the Elections and the Fed.
Trump’s steady lead on the prediction markets was drastically cut off over the weekend and now he only slightly leads the betting markets.
This week brings two pivotal events: the U.S. election on Tuesday and Fed Chair Powell’s address on Thursday. Expect heightened volatility in overnight futures on election night, with market swings likely in response to headline updates. Should election outcomes remain ambiguous as the evening progresses, we could see volatility intensify—markets loathe uncertainty, after all.
Once past these events, we enter a historically bullish stretch that typically lasts through year-end. Given that 96% of professional money managers typically underperform the S&P 500 annually, we may see a last-minute surge from those laggards aiming to make up ground in a potential year-end rally.
Historical data since the market’s inception reveals that the S&P 500 often hits its annual high in either December or January. With the current market trading above January’s highs—expected, as it’s an election year—the odds favor further gains into December.
Market participants are positioned cautiously, with substantial hedging in place leading into this week. If the election results in a decisive, uncontested victory for either party, and results are clear within a day or so, this setup could trigger an unwinding of hedges. Such an unwind would likely catalyze a significant upward surge in the markets, as pent-up hedged positions are closed out.
This bullish response would be further amplified if Chairman Powell announces a 25 basis-point rate cut and signals an additional 25 basis-point reduction at the upcoming meeting. Together, a clear election outcome and dovish Fed moves could create an ideal scenario for strong market gains, as confidence improves and liquidity increases.
There’s a vast gap between coding levels on a chart and actually trading significant size at those levels. I’d marked 20,750-770 as a key zone for the NQ, but couldn’t fully capitalize on the move—my risk management was just too tight.
However, our crude oil trades powered by levels and alt-data have been working nicely.
Moving on,
As far as emerging markets go, looks like Chinese names could see a spike if Dems win the election. Usual suspects Alibaba BABA 0.00%↑ , pinduoduo PDD 0.00%↑ , JD JD 0.00%↑ and the likes. 5-7% OTM call options with 90-120 days to expiry seems a fair time for the move to unfold.
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Levels for the week:
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