E Elections To Influence Moves In Metals And Stocks

The November 6th elections will influence investment decisions, and money flows for the next several months. There are two potential “extreme outcomes” that would potentially cause the greatest shift in financial assets.

Extreme outcome 1: We see a blue wave, and Democrats gain control of both the House and the Senate. Probably bad for stocks and good for gold.

Extreme outcome 2: Republicans maintain majorities in the House and the Senate. Good for stocks and bad for gold.

Now – those are the extremes. The probabilities say we land somewhere between with the Democrats controlling the House and Republicans the Senate.

Metals and Miners consolidated throughout the week. Their short-term structures resemble bullish consolidations that favor breaking higher. However, I don’t think we will see a sustained multi-week trend until after the elections.

US DOLLAR

The dollar is testing resistance at 95.75. I see the potential for an inverse head and shoulder consolidation pattern. Consecutive closes above the neckline would signal a breakout to target the 98.00 level. A breakdown and close below the 94.47 low (right shoulder) would imply a failed cycle and propose a deeper correction.

GOLD

The November 6th election will determine gold’s next move.

I see two scenarios playing out – One bullish…one bearish.

In the bearish scenario, gold breaks the cycle trendline in November and declines to fresh lows in December.

In the bullish scenario, gold enters a multi-week rally after the elections and retakes the 200-day MA and $1300 level.

The seasonal pattern favors a bearish conclusion: Over the last five years gold prices peaked in mid/late October, declined in November and bottomed in December. At some point, this pattern will not repeat. But until then, I think we should favor a bearish November.

It should be clear which scenario is playing out a day or two after the election. We may get some clues leading to the election as well.