My gut feeling

The OMG to the upside is still ongoing and more and more people are chasing highs now. While this round of bounce may likely have not yet run its course, I'm trimming down my short term long  positions with good profits that I got last Monday when the end of world type of OMG was trigged. I'm not bearish yet but I will be travelling most of the next two weeks and I don't want to see my profits evaporated when on the road. Better to be safe than sorry!👌


The biggest uncertainty is by all means the midterm election tomorrow. This could be equivalent to the 2016 election or the Brexit vote in terms of the market reactions. So expect some extreme volatility tomorrow and the days following. Of course, I don't have any crystal ball that I can tell you which way the market will go for the election result, but I do have a gut feeling that I can share with you. Just take my words with a grain of salt.


I think the market has set up and been expecting to see a split of the Congress with GOP controlling the Senate and DEM controlling the House. It seems all the polls have more or less suggest this is the most likely result. In general, the market hates uncertainty and loves certainty. This gridlock situation will create kind of certainty. You see, it will be certainly very challenging for Trump to push ahead any more initiatives as DEM will have more power to block him. They will likely even initiate the impeachment for Trump although it would certainly a vain hope for any chance of success. Actually I'll think the impeachment will help Trump for the 2020 election as more people will feel more disgusted for what DEM is trying to do politically. But this will be another interesting story for later. Having said that, I think the market reaction to this splitting result may be more negative than positive although it is largely expected already. What Trump is doing is certainly very positive to the economy as a whole and I think the market likes to see it continue. But I don't think it will be a huge run away for this scenario.


If the result comes out surprisingly for a total control by DEM for both Senate and House, then you really need to watch for the downside. The market will tank, probably more severely than for the Brexit reaction (6.5% plummet for S&P). I won't give it a high chance but we cannot totally discount it as well.


My gut feeling is actually other way around that GOP maintains control of both Senate and House, against virtually all the polls. We already got this kind surprise in 2016 that all the polls were wrong. I think we could see something similar this time again. If this indeed materializes, it will be a huge positive for the market and I think S&P can easily run up for another 100 points. This will line up nicely for my prediction that S&P could bounce back towards its 50 DMA around 2840 as I'm writing. This will cause a huge pain for those shorting the market and a final OMG running up may occur. That will be the time I will be taking off all my short term longs and shorting the market to expect its next leg down to retest it recent lows around 2600.


I don't think any midterm election has been so much impactful for the market in the past. Let's watch what will happen tomorrow night! I keep my fingers crossed for my gut feeling.   😂😤