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Ignore the Election News and Hype, The Great Traders Do

TurtleTrader® comment: The following excerpts were taken from “Wall St. Wants a Quick, Clean Election” by Brendan Intindola in Reuters:

It won’t be just a sigh of relief on Wall Street but an ovation if the U.S. presidential election on Tuesday produces a clear winner and avoids a repeat of the chaotic 2000 results. And the cheers for a clean vote are expected to drown out partisan cries of victory or defeat. As a near-term market factor, an unequivocal end to the presidential race has become more important than whether George Bush (News) or John Kerry wins, according to equity strategists.

TurtleTrader® comment: Really? So if we have a clear-cut winner…the market will do what? Go up? Go down? On what basis can a prediction like this made? The article continues with more suspect analysis:

With a clear winner, apprehension about a long courtroom brawl will end, fears about attacks on the United States to disrupt the balloting will subside, and divisive campaign rhetoric will fall silent. Concerns about another drawn-out legal fight for the presidency is widespread because Democrats and Republicans will have legions of lawyers dispatched across the country to scrutinize the voting, prepared to fight any irregularities. Also stoking worries are the use of new electronic voting machines in many districts, a sharp increase in registrations of new voters, and a high number of absentee ballots, due in part to the increase in U.S. troops overseas.

TurtleTrader® comment: Let’s assume apprehension ends. Or let’s assume fear about attacks increases or decreases. How can anyone with a straight face take this uncertainty to the market and KNOW whether to buy or sell? Or know how much to buy or sell? Does Reuters really believe the best traders have developed plans that hinge totally on an election outcome? Do they not consider the possibility that the great traders are following something other than fundamental news and analysis for their trading strategy? More analysis from the same article:

In the 2000 election, Bush was declared the winner over Al Gore after a 36-day legal recount battle ultimately decided by the U.S. Supreme Court. During that delay, gnawing uncertainty cost the Dow Jones industrial average 700 points. The Dow ended November 2000 with a 5.1 percent loss. It recovered a bit in December, rising 3.6 percent, but for the year it fell 6.2 percent, the largest annual drop since 1981.

TurtleTrader® comment: “Gnawing uncertainty cost the Dow Jones industrial average 700 points.” Could you not dream up another 1/2 dozen fundamental reasons why the Dow dropped? Isn’t this type of analysis hindsight 20/20? This kind of analysis reminds us of the big talkers you can find in bars across the world. It always sounds good. It makes some sense. But ultimately, it is useless. Do not wake up the day after the election and race to do something in the market. We recommend having a plan of attack that is based on market price movement, not “news” reading. Attempting to tie “news” to your buy and sell decisions is a recipe for disaster.

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