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T3’s Take 3: Pre-Election Fear Is Running Wild

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1) More Brexit Drama

Great Britain’s High Court ruled that Parliament should vote on whether the UK can begin the Brexit.

This drove volatility in UK markets, with the FTSE 100 index falling -0.8%, while the pound sterling surged 1.3%.

The announcement was a major setback for Prime Minister Theresa May, since it could delay the Brexit process, and reveal the UK’s negotiating cards to the EU.

The government will appeal the surprise decision.

2) US Markets Look Nasty

The S&P 500 fell -0.4% to 2088.66 today – not exactly a disaster.

However, the action beneath the surface was nasty, with massive underperformance in biotechnology and continued weakness in high-beta tech stocks.

In particular, this year’s hot IPO names like Twilio (TWLO) and Acacia (ACIA) took heavy lumps.

This – along with today’s massive spike in the VIX – implies that traders are aggressively taking down risk ahead of next Tuesday’s Presidential election.

In fact, 5 major sentiment indicators I track indicate significant fear in the market, which you can read more about here:

http://www.thet3trader.com/2016/11/03/bears-trump-bulls-ahead-presidential-steel-cage-match/

3 Jeff Cooper’s Trade Analysis

This afternoon, Jeff Cooper of the Daily Market Report issued the following analysis of SPX:

The SPX is hovering around the 2090 level which is 180 degrees down from the 2194 all-time high.
It also ties to roughly to the mid-point of the range from the Brexit Low.

The market may be short term oversold, but that is not a reason to go long.

It may be a reason to lighten up on some shorts if you are heavy.

That said, a break of 2090 projects a deeper dive down — despite the 200 day looming just below.

Tomorrow’s Economic Calendar

4:15   EUR Spanish Services PMI (Oct): exp. 55.2, prior 54.7
4:45   EUR Italian Services PMI (Oct): exp. 51.5, prior 50.7
4:50   EUR French Markit Composite PMI (Oct): exp. 52.2, prior 52.2
4:50   EUR French Services PMI (Oct): exp. 52.1, prior 52.1
4:55   EUR German Composite PMI (Oct): exp. 55.1, prior 55.1
4:55   EUR German Services PMI (Oct): exp. 54.1, prior 54.1
5:00   IDR Consumer Confidence (Oct): 110
5:00   EUR Markit Composite PMI (Oct): exp. 53.7, prior 53.7
5:00   EUR Services PMI (Oct): exp. 53.5, prior 53.5
6:00   EUR PPI (YoY) (Sep): exp. -1.80%, prior -2.10%
6:00   EUR PPI (MoM) (Sep): exp. -0.10%, prior -0.20%
8:30   USD Average Hourly Earnings (MoM) (Oct): exp. 0.30%, prior 0.20%
8:30   USD Average Weekly Hours (Oct): exp. 34.4, prior 34.4
8:30   USD Government Payrolls (Oct): prior -11.0K
8:30   USD Manufacturing Payrolls (Oct): exp. -5.0K, prior -13.0K
8:30   USD Nonfarm Payrolls (Oct): exp. 175K, prior 156K
8:30   USD Participation Rate (Oct): prior 62.90%
8:30   USD Private Nonfarm Payrolls (Oct): exp. 166K, prior 167K
8:30   USD Trade Balance (Sep): exp. -37.80B, prior -40.70B
8:30   USD U6 Unemployment Rate (Oct): prior 9.70%
8:30   USD Unemployment Rate (Oct): exp. 4.90%, prior 5.00%
8:30   CAD Employment Change (Oct): exp. -10.0K, prior 67.2K
8:30   CAD Exports (Sep): prior 43.41B
8:30   CAD Full Employment Change (Oct): prior 23.0K
8:30   CAD Imports (Sep): prior 45.35B
8:30   CAD Part Time Employment Change (Oct): prior 44.1K
8:30   CAD Participation Rate (Oct): exp. 65.60%, prior 65.70%
8:30   CAD Trade Balance (Sep): exp. -1.70B, prior -1.94B
8:30   CAD Unemployment Rate (Oct): exp. 7.00%, prior 7.00%
8:45   USD FOMC Member Lockhart Speaks     
9:00   USD FOMC Member Brainard Speaks     
10:00   CAD Ivey PMI n.s.a (Oct): prior 68.1
10:00   CAD Ivey PMI (Oct): prior 58.4
10:00   MXN Gross Fixed Investments (MoM) (Aug): prior -1.20%
10:00   MXN Gross Fixed Investments (YoY) (Aug): exp. 0.90%, prior -3.60%
10:30   USD ECRI Weekly Annualized (WoW): prior 8.00%
10:30   USD ECRI Weekly Index: prior 138.6
11:00   USD FOMC Member Kaplan Speaks   
13:00   USD U.S. Baker Hughes Oil Rig Count: prior 441
13:30   USD FOMC Member Kashkari Speaks     
16:00   USD FOMC Member Stanley Fischer Speaks