I am not representing the following numbers as valid statistical studies, I am simply telling you what has occurred historically, on a price-only percentage move basis for the S&P 500 since 1960.
If there is no definitive winner as of the morning of November 3, 2004, I would expect the markets to move lower. The market in 2000 had a myriad of problems to grapple with including the unwinding of the speculative bubble of the late 1990s, but prices weakened markedly starting the day after the inconclusive election and if that air of uncertainty is recreated this year, I would assume the same outcome: lower stock prices.
If I eliminate the performance in the wake of the 2000 election and categorize it as a unique event (with the potential ramifications described above), and then look at the remaining market reactions after presidential elections one of two things can happen: either the incumbent party in the White House will retain occupancy or the incumbent party will lose.
I have looked at the first 44 trading days after elections since 1960 as to whether the incumbent party retains the White House or loses, and the average downside risk (closing basis) whether Bush wins or Kerry wins is virtually the same: about 2%. If Bush wins (the incumbent party), the average of the lowest closes when an incumbent retains the White House was -2.07%. If Kerry wins, the average was -1.92% (remember this is after eliminating election year 2000 due to the non-election decision).
Also, on average since 1960, in the first 44 trading days after the election (44 trading days is roughly 2 months), if the incumbent retains the White House, the average of the highest closes in the first 2 months after the election was +3.12%. If the incumbent party loses, the average of the best closes was +5.85% (election year 2000 eliminated from grouping).
Currently I have configurations of end-of-day indicators that combine price and volume which usually mean that a short-term lift in prices (like a relief rally) will not be able to attract sufficient followthrough buying demand to initiate a significant leg higher (usually). So, even though I would expect a lift in prices just if there is a definitive winner in the election, with the current readings, I would expect any lift to be a short-term event (maybe 2 to as many as 5 trading days). Other technical measures might improve to suggest additional gains, but for now, I would not expect a huge run-up.
Overall, there is still a positive bias in place technically. Huge gains do not look likely to me.
Here are short-term important intraday
Immediate support for the Nasdaq is 1,983-1,963, and the support becomes especially thick at 1,974.99-1,963.83.
Immediate support for the S&P 500 is 1,133-1,124.
Critical short-term price levels are: Nasdaq, 1,960-1,954.29; S&P 500, 1,120.96-1,117.14. If the Nasdaq 1,954.29 or S&P 500 1,117.14 are undercut for more than 4 minutes inside the trading day, that would increase the chances for weaker prices, and a possible test of the Nasdaq 1,937-1,926 area. For the S&P 500 a test of the 1,111-1,108 area would be possible.
There is a shelf of
resistance for the Nasdaq right at current prices: 1,972-2,006.58; this is all part of the 1960-2055 band of resistance. Inside this 1,972-2,006 layer is especially thick resistance at 1,985-2,000.
The S&P 500 has resistance at 1,127-1,142.05, with thick resistance at 1,132-1,142.05 (a likely stall zone). Next resistance is 1,147-1,163.23. There is a focus of resistance at 1,147-1,150.57. Cherney is chief market analyst for Standard & Poor's