Good morning,

yesterday US indices rallied, with the DJIA up 371.32 points to 18,259.6 (+2.08%) and the S&P500 rose 46.34 points to 2,131.52 (+2.22%). Nasdaq Composite closed at 5,166.17 (+2.37%), up 119.8 points. The financial community increased its expectations that Hillary Clinton will win the presidential elections. The FBI cleared the Democratic candidate for any wrongdoing and this was a relevant event because if investigations would have continued in case of a victory of Hillary Clinton volatility in global markets would had soared. The Volatility Index closed at 18.73, down 3.77 points. Before yesterday drop, the VIX index rose for 9 consecutive session as demand for long position was a priority.  

US Elections and Trading hours

Elections regarding the seats in the Senate and the House of Representative are also important because Democrats just need 4 seats to regain control of the Senate. Hedge Funds and Investment Banks are monitoring carefully this event because regulations regarding dealing, structured products and shadow banking could change.

Just after 4 EST (4 GMT) media outlet will start broadcasting estimates regarding the results of the Presidential elections. Consequences for trading could be relevant as during the Asian session liquidity in the FX market is thin and the stock markets will be closed in US.  The future market however will give opportunity to trade the news. Noise in the markets could be relevant thus signals could be poor. If the loser candidate will ask a recount or he/she will refuse several spikes will be seen across risky asset classes.

Key Levels

Above 2,150 the SPX will be above the most relevant moving averages. It found support on the 200SMA and rebounded to test its 21SMA. Above the 55EMA trading system could generate buy signals.

/CL is trading at 45.1 $/barrel and above 47$ positive sentiment should come back. Beneath 43 $/barrel is likely to see another bearish wave.

EurUsd is trading at 1.1054: In case Clinton win the pair could find support near 1.0855. If Trump will win is likely to see a week dollar, and by Friday the rate could test its 200SMA at 1.1181.

GLD is trading at 122.15. A breakout above 126 can trigger momentum, but below 118.25 short selling should accelerate.

There is a divergence between the SPX and the VIX as the latter rose sharply recently while the former slid but it was not in a selloff. Convergence trading is expected, but is better to trade the /ES than an ETF as equity futures can be traded nearly on a 24 hour basis.

/ES time Frame 4h

GLD daily chart

Multi-ASSET Research

EurUsd 4h chart