Today's thoughts center around the arrival of a pullback. On Friday, Nov. 5th I opined to a colleague that the S&P would continue its wandering ways, and that although we had clearly broken out I thought we would need a shakeout below 1140, probably to 1125 (or the 200 day), before it became urgent to buy stocks.
Today with the Fannie Mae's (FNM) failure to file and the broader news interest in the vote recounts we may see just such a shakeout. It is hard to see the election outcome being overturned and I don't believe we will learn it was rigged but if you were a buyer on clarity, it will get harder and harder to justify ownership as the tape heads lower. FNM is a similar story. The bad news has been out for a while in my opinion and the only thing keeping that stock up is that it has been dead money on the short side. If it starts to work lower and breaks below 62 it could trade with a 20 handle in a hurry.
If you want to read up on the vote recount I recommend this as a summary, and this to get an idea for how old the news is.
It is still way before the open and the downdraft may not materialize but I am thinking we get a brief scare today, sideways trading into expiry on Friday, and then we shall see if the pullback will be deep as I expect. Plenty of time to square up long positions or if you like to spin positions every couple of days you can even get short.
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