One Trader Reveals How To Position For Election Day

We’re coming into the election home stretch and the market has clearly shown its hand. A Trump victory portends more vol and more pressure on equities.

On Wednesday we got the seventh consecutive losing session for the broad market and it’s all thanks to the fact that Trump’s poll numbers have improved in part due to the reopening of the Clinton email investigation.

Wondering how to trade next week’s main event? Here’s Bloomberg’s Richard Breslow to explain:

If you’re searching for the Holy Grail of trading, what are the clues you would pray to uncover? Flows, sentiment, levels of positioning and likely reaction functions of the market. Largely secretive items, increasingly closely held, that every once in a while get exposed in all their glory. There’s nothing better when formulating your own trading plan, especially when there’s event risk.

  • And that’s what we were gifted with earlier this week, when a new poll put a spanner into the works of those anticipating the election result. The market’s violent reaction told you not only the handicapping but also how it was reflected in positions

  • It all laid bare some of the more tenuated analysis of what various consequences will result afterwards. In presidential election trading, keep it simple and accept that you can anticipate only initial reactions

  • Just go back to the first Clinton term when a free-spender candidate was convinced as a president-elect that deficit- reduction was the sine qua non to accomplishing all of his long-term plans. In the end, he really did get that “it’s the economy, stupid”

  • So what do we know with greater certainty? The dollar sold off straight away. Or even earlier if you got the news late. It hasn’t stopped. Biggest winners were safe havens. To an extent that’s frankly shocking. The charts are a mess, but the potential opportunities great

  • Gold has flown, but has stopped at major technical resistance. This is a good one to monitor for the next few days.

  • Equities clearly were unhappy and so far have repulsed the knee-jerk impulse to bottom-fish. Important levels have given way in the S&P 500. Today’s level is not stable and volatility in either direction is likely

  • Poor, poor Mexican peso. Down over 5% since Oct. 25th. What did they know? The 200-day moving average was never even threatened

  • This all looks very much like position evaporation rather than the putting on of new ones. So it’s safe to assume it’s a much cleaner trading slate at this point. Plenty of opportunity after the fact. They won’t take away your club membership if you don’t load up before you’re ready or can afford the noise

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