A key to success in investing is to think ahead. A big event coming up are the November midterm elections.
Recent polls show that Democrats are resurgent. And the legal troubles of President Trump’s former lawyer, Michael Cohen, and former campaign Chairman Paul Manafort are going to give more ammunition to Democrats and distract Trump from his agenda.
So what does that mean for the stock market? Let’s explore with a chart.
Please click here for an updated chart of S&P 500 ETF SPY, which is based on the S&P 500 Index SPX. Please note the following from the chart:
• The chart shows the market starting to break out from the resistance.
• The chart shows the pullback below the prior resistance on the news related to Cohen and Manafort.
• The chart shows the key level.
• Bears look at the potential double top shown on the chart and stand their ground. A double top would be a big negative.
• Often in a situation like this, the relative strength index (RSI) is a helpful indicator. In this case, RSI can go either way.
• Divergence in RSI from the last peak shows that momentum has waned. This favors the bears.
• Volume is low. This indicates that there is no conviction.
• The pattern looks different for the Dow Jones Industrial Average DJIA, Nasdaq 100 ETF QQQ, and small-cap ETF IWM.
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The U.S. economy is about 70% consumer-spending-based. For this reason consumer confidence is important. Bulls argue that the market cannot go down because earnings are rising. Well, earnings are rising because of high consumer confidence. If a political crisis erupts, it may hurt consumer confidence, which in turn would hurt earnings. That should give investors a reason to be somewhat cautious going into the November midterm elections….Read more at MarketWatch.
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