Waiting and Weighing the Options

There is no question that the dominant factors since this market rally started on September 1 are the election and QE2. The sentiment is strongly for big Republican gains and a forceful QE2 posture.  Whether or not these positions are ratified will determine the direction of the market for the rest of the year. Lets look at the contrary position.

1. The economy is getting legs and corporate and government projects are waiting in the wings for resolution of the electoral process.

2.  The Fed is in a corner and if the economy is on much better footing as we suspect, the market will start pushing interest rates higher. Forget QE2.

3. The great middle of the electorate is conflicted, the Progressive Wing of the Democratic party is disappointed and silent, the Extreme right wing is mad and vocal and want their power back.  Political commentators and polling organizations view the quiet on the left and noise on the right as indicating a right wing victory.  I would suggest that quiet and reclusive are not an indication of not voting ones beliefs.

4. Higher interst rates will be reflected in a stronger dollar.

5. If the Democrats hold their majorities the speculative positions now being held by Wall Street will be dumped.

Please refer to the October 14th post for background info.