The Republicans have launched the biggest negative, fear mongering, character assassination attack adds in history against Obama in the last 48 hours of American Politics.

Massive buys from Republican 527′s the RNC and McCain/Palin adds have thrown every piece of slime possible at Obama. This has been augmented by the Republican blogs right wing media,leaflets and mailings. Obviously campaign finance reform is at best a joke in front of an onslaught like this.

This election is going to be a lot closer than you think!

Obama’s compilation poll numbers actually improved from +6.9 to +7.3% on RealClearPolitics.com yesterday. But elections are not held nationwide. Forget this number!

The negative adds attacking Obama have been targeted to battleground states, NOT the nation. These statistics are nationwide and include the huge populations of California and NY where Obama has 20%+ leads. When you factor that in the race becomes much closer. The character assassinations are working. The question is how well.

Example – New Hampshire is a battleground state. UNH has a daily tracking poll and five days ago it was at +16%, two days ago it was at +11%. Nothing measures the last 48 hours. But other more major polling outfits have this race two days ago at about +7%.

This is happening through out all battle ground states as Obama’s once commanding lead in battle ground states has been cut in about half over the last week.

If McCain /Palin are successful with this attack instead of going after issues this country will be torn in two and all politics and the media will become is negative, slime throwing, character assassinations. – because it works/sells. Fear mongering has made us a truly weaker and divided nation. If you think America was divided in "you are either with us or against us" under Cheney/Bush years – you haven’t seen anything yet.

Instead of dying down as they usually do the media outlets on both the left and right will hyper charge the negativity. – It works/sells. Minority groups will feel that they were cheated by lies and charter assassination and react. If you even associate with a Muslim you too will be labeled a friend of terrorists by our government. The right wing whites will just arm itself more in response. Because of the weak economic situation that already exists the situation could rapidly deteriorate.

The Good News for Obama – Yes there has been a significant impact in McCain’s mud slinging. Throw enough slime and some is bound to stick on some folks. But 4 factors are in Obama’s favor.

1) early voting has softened the impact of the last minute swift boat adds. Perhaps 1/3 of Americans have already voted and missed most negatives.
2) Obama has reached above 50% of the vote in the polls of some critical battleground states for over a week. This means that the vote is pretty solid here and the slime will not stick as much on these voters.
3) Obama supposedly has a superior ground game – he is going to really need it today.
4) Obama has a lead in the polls of @7% and most voters know this. This will encourage Obama supporters and discourage McCain supporters.

What to watch for election night

Virginia – Polls close early here (7PM EST) and if Obama wins in this Republican state, its going to be real hard for McCain to win. Latest polls suggest a +4.3% for Obama two days ago.

New Hampshire – Again polls close early too. If McCain wins or is within 5% of Obama it means that the character assassination or the last 48 hours is working and you will see these numbers reflected throughout the country.

Therefore, you should have an idea of what’s going to happen by 8:00 EST just by watching these two states. This will tell you how all the other battleground states will turn out.

Pennsylvania – A must for Obama – A loss here and its going to be real hard to see Obama win. Obama up +4.4% two days ago.

All the other battleground states.

Obama’s Grandmother Dies

What a devastating blow for the Obama family on election eve. His mentor and perhaps the person most responsible form making Obama who he is yesterday died from Cancer. More on Madelyn Dunham .

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow -0.06% down
NASDQ +0.31% down
S&P500 -0.25% down
Russell2000 +0.18% –

Headline – Holding Steady

US Market & Foreign Markets -

Technicals – Markets traded within a normal 125 range yesterday in light volume. This, for the first time in months was a normal light volume day.

Japan was up over +6% in trading last night (stimulus package and they were closed Monday) Other Asian markets fell @ -1 to 2+%

Fundamentals – Manufacturing activity in the USA fell to a 26 year low and the auto industry got decimated in its monthly report . GM car sales dropped -45% for the month. Despite these horrible numbers stocks barely moved yesterday. In the long run this means massive layoffs in the US auto industry and related companies.

Example of how the unregulated Credit Default Swaps market is impacting this is you had to have a credit score above 700 to use GM financing. Other manufacturers loss less Ford 30% but it was really bad news.

The fact that markets held up so well despite the bad news is a bullish sign. Looks like the meltdown of our auto industry is already baked into stock prices.

Earnings season is now 80% over

Historically November starts a usually very bullish period for stocks. December is historically the best month of the year..

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

Credit markets are the dog and the Stock Markets are the tail. Without credit the the tail won’t wag.

3 MTB chart

LIBOR chart (3 month)

Bottom Line – Banks are not leading to other banks, but the commercial leading market is slowly opening up. This helps Main Street’s access to credit cards to adjustable mortgage rates.

OIL

Basically stocks go up so does oil. Oil also has an inverse relation to the dollar. Oil prices fell -5.57%. Stocks should have shot up on this, but didn’t. The GM news probably acted as a counter weight.

Chart of oil (WTIC)

The Dollar

Dollar and Yen are rising. (More on this later)

Chart of Dollar

The dollar rose significantly Friday (+0.67%). The major move higher in the dollar (almost 2% in the last two days) is forcing oil prices lower.

The VIX

The VIX (measures amount of fear/volatility in S&P) . The VIX was at or near its highest levels ever early last week and is now dropping like a stone = bullish

Chart of VIX.

Short Term Outlook = Rally goes on until it hits resistance Resistance Levels.

This market is a short term traders dream and a long term investor’s nightmare.

Reading The Tea Leaves – (Basically same message as yesterday)

Best guess- traders should lock in (sell) gains at or near technical resistance levels of 9764 or 10,000 and wait for a dip to buy.

Holding stocks through Tuesday is risky because of the elections according to CNBC’s Jim Cramer.

Longer term investors buy the big dips.

Personally my long term investments are now 10% stocks. I am trading a lot on dips and will probably sell at 9764 or 10,000 depending on the volume figures. Breakouts through these resistance levels in big volume would be bullish and a reason to hold on to short term trades.

The fundamental that could stimulate a rally is a second stimulus package that creates more private sector jobs.

Economically, Main Street is no where near out of the woods, but the stock market is oversold and emotionally ready to rumble.

AS ALWAYS DO YOUR RESEARCH BEFORE INVESTING

Long Term Outlook -Cautiously Bearish

Changes to Bottom Line Section Bolded

Technicals – Double bottom has formed, advance in strong increased volume, and a new high on VIX . Technically all this = at least a short term rally and maybe a long term bottom.

Reading tea leaves – Look for range between 7800 and 10,500 for rest of year. Dow closes above 9764 (in strong volume) = NEUTRAL Long Term Outlook.

Fundamentals – Financial mortgage transparency problem (credit default swaps $50 to $70 trillion) is far far far far far far far far far bigger than anyone thought. New worldwide rescue plan offers hope, but this rally is going to be a bumpy ride because retail investors trust has been shaken. Global growth is obviously slowing

We are in a recession. How bad/long the worldwide recession will be is be is the major question. It’s beginning to look like the recession might last through 2009 – perhaps longer

Asset Allocation/Recommended Sectors (long term)

* 60% to 95% Cash – This depends on your risk tolerance

*10%+% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X the NASDQ ) DDM (ETF that does 2X the Dow ) SSO (ETF does 2X the S&P 500)
*5%+ Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall – highest risk
*5%+ Alternative Energy
GEX(Alternative energy ETF) (If Obama wins you will see this sector flourish)

Chief Strategy – Buy the DIPS of trending sector – This is not your fathers market- over the 8 Bush years the Dow has gone from 11,000 to 9,000 and uncertainty clouds the future. The major trend now is volatility.

Traders who have a strong tolerance for risk jump in on dips and invest more. Sell or go short into major rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on big dips. (5% on each big dip) Do not buy into rallies.

Shorting – Three ETF that short 2x what the the major indexes do -
TWM – ultra short Russell 2000
QID – ultra short NASDQ
SDS – ultra short S&P 500

As Always Do Your Own Research Before Investing

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