Charts of the S&P 500 before the mid-term elections and after the elections.
- On 11/6/2018 the S&P 500 closed right under resistance at 2756.55.
- The next potential resistance level was at the 200-day moving average at 2763.70.
- Potential support was at 2700.40.
Since the close on 11/6/2018 was right under resistance, we felt the markets were predicting a Republican Senate and a Democratic House after the election. Traders positioned themselves for a potential big move the next day if the election went according to plan. However, if the election had a different twist, we knew the support could be at 2700.40. So, the risk was defined, and there was a clear get out level if needed at 2700.40. Our portfolios were positioned to take advantage of a potential rally after the elections.
- At 9:29 AM on 11/7/2018 the S&P 500 was at 2755.45 which was the previous days closing price.
- At 9:30 when the markets opened for trading the index price was 2744.13. The S&P 500 moved above the resistance at 2774.13 and the 200-day moving average at 2763.77.
- At the close of the day, the index had an up move and was trading under another potential resistance at 2816.84.
We were able to use the trading data given to us by the traders on 11/6/2018 to make a calculated guess at the market action the day after the election to increase our client’s portfolio. If we were wrong, we knew our risk level would then be at the low of the trading range at 2700.40.
John N. Lilly III, AAMS
Portfolio Manager, RJ
The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum Oscillator that measures the speed and changes of price movements.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S stock market. Past performance may not be indicative of future results. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investors’ results will vary. Opinions expressed are those of the author John N. Lilly III, and not necessarily those of Raymond James. The information contained was received from sources believed to be reliable, but accuracy is not guaranteed. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. The charts and/or tables presented herein are for illustrative purposes only and should not be considered as the sole basis for your investment decision.