E Market Briefing For Wednesday, Oct. 21

Who among us believes the Election will be settled that night? Who believes the economy will recover next year almost regardless of the outcome? We all have our views, mine for now (definitely subject to revision) is for a correction again but not catastrophe, with small business relatively better next year.

But, and that's a huge but, it requires stabilization of the pandemic's duration, more so than the outcome politically, though of course we stand by our view of capital-gains related selling pulled into this year, especially if perceptions of higher taxes ahead cause usual reluctance to delay sales into a new tax year.

At the same time, the overall high-level S&P begs the question: what if Trump wins, and we get a huge blow-off or resurgence (no higher taxes helps too in such an outcome). The market's internal corrections haven't 'undercut' S&P's overall pattern, at least not so far. That sort of illustrates a 'tired' market, with a continued narrowness as investors basically nurse pre-election 'bets', or just plan riding-through the Election Season with post-chaos pre-2021 optimism.

That's how S&P manages to flirt with a structural 'double-top' built over these last few weeks, and that's at least the superficial technical picture. In our view even with a bullish alternative for the market, there's remains relatively little potential upside for 'super-cap' or FANG-type stocks, while smaller stocks for sure have more or less defensively languished in-anticipation of better times, but realizing (depending on their industry) much relies on emerging from this.

The market essentially is 'stringing us along' it could be said, pending what we get as an outcome of the Elections. And the S&P's (and seemingly analysts) bias for a Trump victory, leaves traders in a quandary for a few reasons more or less unrelated to how the vote goes, but what happens to 'civility' (to use a gentle term) if he wins, or also if the 'vote' goes into a dispute, how long does that leave uncertainty dominating until it's resolved? Will the people more or less get 'unhinged' on a societal basis, and would that ruffle stocks?

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