Gauging Election Expectations Through Sector Performance

With the presidential election sloppy swishing closer (video below), markets continue to ignite the exhilarating splendor and sublimity of double-black diamond coke sloped peaks (see $ACIA,  $TWLO, $SINA, $BABA, burritos, bios, or anything else OA alchemizes into gold). One may surmise the fate of the world’s most significant superpower over the next few years is in the hands of our deeply impressive and likable presidential candidates. Yet the markets don’t seem to care…yet.

At some point (I believe) the caprices of the election in the form of headlines will impact this market. As a result, I’ll begin scanning for shorts from the overextended pile over the next week for a potential tone-shifting September and VXX Halloween, which should fade rather quickly post election – Santa season once our great nation swallows the truth-telling, heightened email-conscious, non-media colluding Hillary; remember, it’s her-story, not yours. I’ll share prospective shorts as this window approaches. Expect Fly’s Ark to remain imperturbable, and for gold to make a volatile run near/above recent relative highs before fading into year end. Again, these are merely my expectations based on my engagement with the market over the last 11 years. We all have our own expectations, but through an aggregate hub for vetted quality here at iBC along with diachronically dynamic tools like Exodus, a dialectical mode of knowledge formation and actionability is produced. Months ago, I laid some market expectations for the May – summer months here, here, here and here some of which have actually come into fruition.) In the meantime, an ensemble of Caligula style decadence reigns over the market with a crescendo by Labor Day weekend potentially on tap.

Taking a look at sector performance during the latter part of Obama’s second term in office, has led me to consider the alignment of sector performance with the two major political parties and their candidates. The Cramer has his own Trump and Hillary portfolios to track how specific stocks might perform under either presidential configuration. From my own scans and reflections on the market within the context of a Democratic presidency looking at a repeat, here’s what I’ve noticed (mere observations):

• KOL is trending: seems quite un-Democratic for coal to have doubled since the start of the year; maybe a dead-cat bounce after Obama’s second term effectively destroyed this sector? Or maybe commodity cyclicality? On watch.
• Solar has been dumping ($TAN is masking the precarious action in the popular solar names and actually looks to be bottoming): seems quite un-Democratic for solar not to be at some highs here given the broad indices ATH status, no? Or has pro-alternative energy policies created too much competition and temporarily oversupplied the market? On watch.
• Hospital stocks dumping: seems quite un-Democratic given the proliferation and expansion of Obamacare (and presumed continuation under Hillary) for this industry to not be in better shape as evinced by recent share price bidless pinaction. $HCA is holding an important level here, $UHS is trying to hammer out a bottom, but check out the action in $LPNT, $THC (scaled in long last 2 weeks), $CYH (got stopped out today for loss), and $ADPT (scaled in long last 2 weeks). Wage increases will definitely eat some profits, but the price action in some of these names is downright ugly. On watch.
• $ITA $PPA (aerospace/defense) are trending with the market at highs: not sure what to make of this, but I’m sure a non-Democratic presidency is more bullish for this sector than a Democratic one. On watch.

Now are these mere price dislocations that could correct themselves once the frontrunner secures the presidency? If so, the current action in the aforementioned bulleted-names can be the market cleansing all late-participants to shorting $KOL into its January 2016 lows, or buying $TAN into its April 2015 highs, or buying $THC into its July 2015 highs. You get the idea; a rubber band stretch cleansing all market participants that were late to these Democratic theses trades hopping on board once Obama won his second term and policy direction was clear, which meant at the time trades were too obvious and chaseable, hence the resulting cleansing.

When attempting to reverse engineer causality, there are always latent or tangential factors that are missed and/or willingly discarded, resulting in possible syllogistic fallacies, etc… But on the surface, it seems like the potential plays are to do the opposite of the above bulleted-points: short coal, long solar, buy hospitals, sit back, kick your feet up, and bathe in cash if the polls play out. Or is there something more sinister lingering in the background. Why does it appear that the media is working overtime to endorse and bless the candidacy of Hillary, even though the polls consistently show her comfortably leading? Enter the need for a dramatized election (Americans love this because we’ve been programmed to) that commences with polls tightening, nightly presidential and vice presidential debates heating up, and posting/tweeting content and activity throughout social media being dominated by the ‘genuine’ concern that the xenophobe wall mason monster of a candidate could actually win and pose a risk to our nation. A tense scene with time running out, the score closer than its been, maybe volatility kicks up in the market, and the tickers in the bulleted-points above are chased ($KOL continues to run, $TAN wallows at lows, hospitals struggle, aerospace/defense rips). Finally, market participants who accumulated early on dump supply onto these late to the party market participant chasers looking to position for a Trump presidency, and then WHAM, said tickers in the bulleted-points reverse and the price dislocations are reconciled.

Just some Friday afternoon thoughts from Brooklyn. Have a great weekend.

 

-StrictlyTrades

 

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