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Market Votes for Clarity

Jim Giaquinto

Stocks moved higher in the run-up to the midterm elections on Tuesday. The big question now is: Will tonight’s results impact the market?

The most widely expected outcome is that the Democrats take control of the House while the Republicans retain the Senate. If that indeed happens, then this week’s most important event will likely be the Fed meeting. Of course, who really trusts polls after 2016 and Brexit?

The biggest market reaction would probably be if the Dems have a better night than expected and take both sides of Congress. Longer term though, whether one party controls the Legislature or its split, the market should be fine. Ultimately, its much more interested in rising rates and trade than red or blue.

It was a low volume session on Tuesday, but was still positive. Unlike yesterday, all three indices moved upward. They each threatened late to give back all of their gains, but eventually rallied into the close. The Dow was up 0.68% to 25,635.01 and the S&P rose 0.63% to 2755.45.

The NASDAQ failed to join its counterparts in the green on Monday as FANGs had a rough session. On Tuesday, those tech giants had a much better day with only Netflix (-1.46%) failing to rise. The index managed to advance 0.64% to 7375.96.

Regardless of whether or not the elections have a direct impact on the market tomorrow, it will be good to get one uncertainty out of the way. The trade issues and fear of rising rates are likely to be with us for much longer.

The most important thing is that when the opening bell rings on Wednesday morning, we’ll still have a strong economy and a market that has, hopefully, just emerged from a sharp correction.

Today's Portfolio Highlights:

Counterstrike: Crude oil has slipped below $62 from $77 in the past month… but Jeremy has a feeling that a bounce back is coming. Actually, he has a very technical Fibonacci setup that is suggesting such a rebound. The editor wants to get some exposure today before it begins. Therefore, he added a small, “starter” position in VelocityShares 3X Long Crude Oil ETN (UWT) with a 5% allocation. Read the full write-up for more.

Stocks Under $10: Coming off such a sharp correction, it’s not a bad idea to take a profit when you can. That’s what Brian Bolan was thinking when he sold Energy Fuels (UUUU) on Tuesday. You may remember that this company was one of the top performers yesterday due to a big spike in volume. The editor took the chance to “sell into strength” and secure a nearly 12% return in just a little over a month. The portfolio still has exposure to basic materials through HighPoint Resources (HPR) and Halcon Resources (HK), so its covered if the sector jumps higher.

The portfolio immediately replaced the position by adding Energous Corp. (WATT). The company develops wire-free charging technology and was once a real high flyer, but it has since come way back to earth. However, it recently reported a positive surprise of more than 7.5% for its third beat in the past four quarters. Brian likes the idea of this company as a disruptive technology, and believes it will be on the road to recovery if we have truly seen the end of this correction. Read the full write-up for more on today’s moves.

Surprise Trader: Dave sees a good report coming up for National Vision Holdings (EYE), a Zacks Rank #2 (Buy) company in the optical retail business. Last time, EYE reported a positive surprise of more than 10.5%, and today it has a nice Earnings ESP of 6.12% for the quarter coming before the bell next Tuesday, November 13, Furthermore, rising earnings estimates for next quarter has the editor thinking that the upcoming report could also include a bullish guidance. He added the stock on Tuesday with a 12.5% allocation. Read the full write-up for more on all of today’s moves.

TAZR Trader: The market bounced at just the right time for the portfolio’s ProShares UltraPro QQQ 3X Bull ETF (TQQQ) position, which Kevin added on October 30 just as stocks were climbing out of the correction. But now the editor is seeing some resistance in SPX getting past 2750. Instead of waiting around to see if it has the energy to break through, Kevin decided to get out now and sell TQQQ for a 12% return.

Speaking of breaking through, you’ve probably heard that today is the midterm elections. The market would be totally fine if the power in Congress is split between the parties, but Kevin thinks this outcome could still bring an “exhale and sell” reaction this week. Therefore, he also sold Russell 2000 Small Cap 3X Bull ETF (TNA) on Tuesday for an 11.7% return and Direxion S&P 3X Bull ETF (SPXL) for 2.3%.

Large-Cap Trader: In what John calls “a no-brainer swap”, the portfolio sold the underperforming Novo Nordisk (NVO) and replaced it by adding Bristol-Myers Squibb (BMY). One look explains why this swap was such an easy decision. BMY is a Zacks Rank #1 (Strong Buy) with solid Zacks Style Scores across the board. It is also a rebound candidate that slipped to around $50 in the selloff and could be poised to bounce back to its 2018 high of $68 or more moving forward. BMY also has an attractive valuation with an annual dividend of 3.16%. ALL of this is an improvement on NVO. Plus, this position stays in the defensive space of large-cap pharma. Read the complete commentary for a lot more.

Zacks Short List:
It was another impressive weekly adjustment with double-digit winners for two of the four stocks that were short-covered. The names that left the portfolio today included:

• Schlumberger Ltd. (SLB, +15.7%)
• Agnico Eagle Mines Ltd. (AEM, +13.4%)
• BioMarin Pharma (BMRN, +5.7%)
• Alibaba (BABA)

The new buys that replaced these names are:

• Canopy Growth Corp. (CGC)
• Baidu (BIDU)
• GrubHub (GRUB)
• Tencent Holdings Ltd. (TCEHY)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Have a Great Evening,
Jim Giaquinto

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