ELECTION CONCERNS DRIVING VOLATILITY, HCM BUYLINE REMAINS POSITIVE

October 29, 2020

HCM-BuyLine®

The HCM-BuyLine® is positive, and even with the selloff yesterday, we are not very close to any change in our bullish view. The market is now getting oversold and trying to find a foothold. We see the market being volatile for the next two weeks and especially over the next 5-6 days. We see any weakness as a buying opportunity.

I would not be out of this market and would not be short this market, because depending on who wins Tuesday, we could see a dramatic run-up after the election. Let’s all hope there is a very clear winner Tuesday, even if it's not the candidate you are voting for. 

VIX surged to above 40 and we are now reaching levels where the market is pricing in significant expected moves over the next few months. And as the chart shows below, when VIX reaches 40, it can mean we are near a turning point for the VIX to fall and stocks to find some footing. 

VIX Volatility Index

The election is ending, and what an exhausting and excruciating experience it has been. The selloff yesterday was very hard and took no prisoners. The news media keeps touting that it is due to the spike in COVID-19, but we think the selloff yesterday and the lack of any meaningful rally for the last two months is all about the election. With COVID-19 spiking up primarily in the Midwest, the news media is blasting it 24/7, and everyone is getting worried. We repeat, it is not about getting COVID-19, but about the politicians shutting down the economy again. What we do know is that President Trump will not shut down the economy again. That is a fact. What we do not know is will Biden shut down the economy? This country cannot sustain another shutdown, and even with Germany and France taking measures to slow the spread, they are only shutting down certain business and areas for a short period of time. El Paso has seen a spike, and the powers that be are taking reasonable action in shutting down parts of the town, as well as some business where social distance needs to take place, but only for two weeks. Hospitalizations and deaths are low and very manageable now. I did call two primary care doctors I know, both in Texas at different hospitals, and both had the same response, they are not even close to being full or feeling nervous about the spike.

There is a lot riding on this election, maybe more than any other, so please get out and vote. 

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