All of us old timers who had fought for equal rights in the 60′s erupted last night in rivers of tears. What we had taught our children and believed in so strongly about America came to pass last night as a black man, Barack Obama was elected President of the United States. What a phenomenal message Obama represents for the USA and the world. What’s unique is he is first our president who happens to be black. This is the only country in the world that this would happen.

Last night -

*Hope won out over fear
*Competence over ideology
* Working together over unilateralism

In watching Barack’s campaign over the last few years you have to be inspired by his managerial skills and competence. He started from nothing and took everything that the far more experienced Clinton and McCain campaign’s threw at him. Barack adapted, organized, counter punched and won. What’s most impressive is the ability of Barack (and those close to him) is his creative competent managerial skill.

The torch has been passed to a new generation. The war in Iraq is over and the "you’re either with us or against us era." has at least for now come to an end. Yet, if you are our enemy we will still "fight you and defeat you."

Hillary Clinton – Proved she is the energizer bunny of American politics. What a positive Hillary is for women everywhere who have fought for so long and so hard to break the glass ceiling. Even after defeat she didn’t whine but worked her heart out for the Obama campaign (68 trips).

John McCain – Where was the man who gave that gracious conciliation speech in the campaign?

Stocks.

AS ALWAYS DO YOUR OWN RESEARCH BEFORE INVESTING

Index % Change Volume

Dow +3.28% up
NASDQ +3.12% up
S&P500 +4.08% up
Russell2000 +1.39% –

Headline – Amazing Rally

US Market & Foreign Markets -

Technicals – The predicted "Amazing Rally" happened – it just took three instead of one day to materialize. The folks at the right wing financial channel may finally begrudgingly admit that a chunk of this rally was because Obama was going to be our next president (consistently led in the polls) and the nation would move forward is hope not fear.

Volume did move higher confirming the price move. However, volume was average at best.

We’ve had two Amazing rallies. and that’s a long term bullish sign.

Reaction from Asia was positive over night Korea +3% Japan +4.5 and China +3. European markets are down@ -2% this AM

Fundamentals – We did NOT get a filibuster proof Senate senate and that’s good for Wall Street. There will be some selling into the Obama election news.

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

Jobless numbers come out on Friday and they and future numbers are not going to be good.

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.

Real progress is being made. The credit spreads are tightening and LIBOR has fallen from 4.8% a few weeks ago to 2.7% this AM. That’s a real significant drop and shows retail credit is again beginning to flow. Homeowners who have adjustable mortgages tied to LIBOR should all be breathing a sigh of relief. LIBOR down another 0.20% this AM.

The 3MTB rose +10.71% to +0.465%. The Fed rate is 1.00%

3 MTB chart

LIBOR chart (3 month)

Bottom Line – Banks are not leading to other banks, but the commercial leading market is opening up. This helps Main Street’s access to credit cards to adjustable mortgage rates. But by no means is credit back to normal.

OIL

Oil prices rose a huge +10.36% and consequently the dollar fell. Things should move in the opposite direction today

Chart of oil (WTIC)

The Dollar

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

Chart of Dollar

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 –

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

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

We did basically hit the 9764 resistance level yesterday (within 20 points) . Wall Street likes to buy on the rumor (in this case Obama is going to get elected) and sell the news.

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. However short term selling the election and a bad Friday employment # for the month of October should hurt stocks.

Technically the move higher has be too powerful not to get extended after a dip. The spreads in the credit markets are narrowing and another stimulus package is probably comming. = Buy the Dip

Economically, Main Street is no where near out of the woods. But there is hope.

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,. 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)

* 50% 60% to 90% 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 9,500 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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