"Historical experience shows that one year after midterm elections, U.S. stock often performs well" - however, such performance may face a bad reality after this election. With uncertainty about the current results of the U.S. midterm elections are lingering, investors may want to take advantage of the strong market in the near future.
Fundamentals
Asia-Pacific stock markets performed mixed on Wednesday. Japan's Nikkei 225 index fell 0.6%, while South Korea's comprehensive index rose 1.1%. At the same time, major European markets turned down the same day. Germany's DAX index fell 0.7%. Both the French CAC 40 and the UK FTSE 100 fell 0.5%.
After yesterday's election, control of the two houses of Congress remains to be fought for, although Republican is expected to gain a weak majority in the House of Representatives. However, the Republican Party has not performed as strong as many expected, with many candidates supported by former President Donald Trump underperforming.
It is not clear which party will receive a majority in the Senate, as key constituencies for Georgia , Wisconsin , Nevada and Arizona are still undecided.
Meanwhile, the current overall trading activity may remain somewhat sluggish as investors look forward to tomorrow’s consumer price inflation report.
Historical experience shows that US stocks often perform well in the year after the midterm elections. Because in recent years, the interest rate of US bonds tends to decline after the election, while the price of gold tends to rise. However, is this true? In the current environment where the Fed rate hike is far from over, financial markets may have to face a bad reality. That is: the current inflation is still very high, interest rates are also very high, and the overall market value of the stock market is still very expensive. The market is more concerned about the final level of interest rates than the Fed's pace of tightening policy, which is right. The stock market does not have the conditions for continuous rise. The Fed and other major central banks look likely to continue tightening interest rates by the first quarter of 2023. Economic growth may continue to slow down at the beginning of the new year, and global financial markets are vulnerable to pressure as monetary policy continues to tighten. These adverse factors have not been fully reflected in earnings expectations or stock valuations. Therefore, investors may want to take advantage of the strong market in the near future.
combined with the current macro environment , our judgment is that, first, the probability of the Democratic Party controlling the two houses is low; second, this midterm election has limited impact on the current financial market. High inflation is the most important macroeconomic feature at the moment. No matter which party controls the policies that Congress can introduce, there are relatively limited policies. Inflation determines that large-scale trade decoupling will not be the first choice for the United States. The Fed will remain a strong anti-inflation attitude. Therefore, the macro environment determines that there are not many things that can be changed in the midterm elections.
Technical aspect
Dow Jones Industrial Average Index opened lower today , trading near the 50-day moving average, and also gaining support from the 200-day moving average. RSI is slightly upward in its 50 neutral interval, while MACD moves laterally near its 0 axis.
However, in the four-hour chart trend, if the closing faces the dead cross downward structure, short may face a further decline to the 33260 level after the rebound confirms the short-term top 33190 level. From here if the bears do not receive further support, then the price will further test the new high above the 33,800 level. Before that, yesterday's top 33360 level would be the first resistance, while August 26 high 33389 would be the second resistance, clearing this key level would have an additional benefit.
Overall, the Dow Jones Industrial Average has been negative in its long-term time frame, and it is possible to turn the outlook into bullish only if it climbs above the 35500 level. In terms of operation, short selling when the high is the main focus.
trading suggestions
trading direction: empty
entry point : 33820
target point: 29979
1 stop loss point: 35600
valid period to: 2022-11-23 23:55:00
Support point: 32626, 32179, 31733
Resistance point: 33360, 33389, 34287
Risk warning and Disclaimer clause
The market is risky, so investment should be cautious. The content of this article is for reference only and does not constitute personal investment advice, nor does it take into account the special investment goals, financial status or other needs of some users. The investing based on this is your own responsibility.
