[font=Arial,Helvetica,sans-serif]How to use the stock market as the presidential predictor[/font]
[font=Arial,Helvetica,sans-serif]Pundits, analysts, and experts aside, if you want to know who will take the helm of the U.S. in January, you must consult the modern prognosticator: the stock market. With the presidential election "too close to call," the numbers nerds have looked to the Dow Jones Industrial Average and its knack for untrammeled clairvoyance in predicting presidential outcomes. If the stock market truly is the sum of all current knowledge and future expectations, we can expect the election to go to Bushor Kerry.[/font]
Democracy and the Dow
http://www.redherring.com/Article.aspx?a=10939&hed=IPO%20Watch:%20Democracy%20and%20the%20Dow
It will be all politics, all the time next week. Anything else will have a tough time getting anyones attention, even on Wall Street.
October 29, 2004
With the pollsters saying that Tuesdays presidential election is too close to call, its worth taking a moment to look at what the Dow Jones Industrial Average (DJIA) is saying.
Wall Street usually favors big business and the Republican Party. On the other hand, Joe SixPack feels more comfortable with trade unions and the Democratic Party.
Interestingly enough, since 1960, the DJIA has performed better with the Democrats in control of the White House. Consider the following:
The Republicans and the Dow:
Nixon/Ford White House years from 1968 to 1976 - The DJIA gained 6.45 percent.
Reagan White House years from 1980 to 1988 - The DJIA gained 124.96 percent.
Bush I White House years from 1988 to 1992 - The DJIA gained 52.23 percent.
Bush II White House years from 2000 to 2004* - The DJIA lost 7.25 percent.
(* As of Thursday, October 28s close.)
Average annual gain for the 24 years - 7.35 percent.
The Democrats and the Dow:
Kennedy/Johnson White House years from 1960 to 1968 - The DJIA gained 53.23 percent.
Carter White House years from 1976 to 1980 - The DJIA lost 4.05 percent.
Clinton White House years from 1992 to 2000 - The DJIA gained 226.76 percent.
Average annual gain for the 20 years - 13.80 percent.
Growl now, Dow Jones
So what is the stock market telling us?
The DJIA closed on October 28 at 10,004.32, down 6.83 percent from its closing high for the year of 10,737.70, reached on February 11. The sentiment has been bearish.
With an underperforming stock market, the DJIA could be signaling a Republican victory in Tuesdays election.
Reading the specialists short-sale ratio
On the other hand, the specialists short-sale ratio is telling us a far different story. (See IPO Watch: Market Psychology 101.)
The specialists short-sale ratio is the ratio of the amount of stock shorted (which anticipates a sell-off of the stock) by the specialists on the floor of the New York Stock Exchange (NYSE) to the total short sales. The NYSE reports these figures weekly.
The theory is that when the specialists short-sale ratio rises above 60 percent, it is considered a bearish signal for the stock market.
On the flip side, when this ratio falls below 45 percent, it is considered a bullish signal for the stock market.
For the last 31 weeks from October 8, the date of the latest report, back to March 5, the specialists short-sale ratio has been reported to be between a low of 20.7 percent and a high of 29.9 percent. The sentiment has been bullish.
With the specialists short-sale ratio flashing a bullish sign, this could indicate a Democratic victory on Tuesday - and a change of occupants in the White House in January.
So whatever happens on November 2, there will be somebody, somewhere saying: The stock market told you so.
[font=Arial,Helvetica,sans-serif]Pundits, analysts, and experts aside, if you want to know who will take the helm of the U.S. in January, you must consult the modern prognosticator: the stock market. With the presidential election "too close to call," the numbers nerds have looked to the Dow Jones Industrial Average and its knack for untrammeled clairvoyance in predicting presidential outcomes. If the stock market truly is the sum of all current knowledge and future expectations, we can expect the election to go to Bushor Kerry.[/font]
Democracy and the Dow
http://www.redherring.com/Article.aspx?a=10939&hed=IPO%20Watch:%20Democracy%20and%20the%20Dow
It will be all politics, all the time next week. Anything else will have a tough time getting anyones attention, even on Wall Street.
October 29, 2004
With the pollsters saying that Tuesdays presidential election is too close to call, its worth taking a moment to look at what the Dow Jones Industrial Average (DJIA) is saying.
Wall Street usually favors big business and the Republican Party. On the other hand, Joe SixPack feels more comfortable with trade unions and the Democratic Party.
Interestingly enough, since 1960, the DJIA has performed better with the Democrats in control of the White House. Consider the following:
The Republicans and the Dow:
Nixon/Ford White House years from 1968 to 1976 - The DJIA gained 6.45 percent.
Reagan White House years from 1980 to 1988 - The DJIA gained 124.96 percent.
Bush I White House years from 1988 to 1992 - The DJIA gained 52.23 percent.
Bush II White House years from 2000 to 2004* - The DJIA lost 7.25 percent.
(* As of Thursday, October 28s close.)
Average annual gain for the 24 years - 7.35 percent.
The Democrats and the Dow:
Kennedy/Johnson White House years from 1960 to 1968 - The DJIA gained 53.23 percent.
Carter White House years from 1976 to 1980 - The DJIA lost 4.05 percent.
Clinton White House years from 1992 to 2000 - The DJIA gained 226.76 percent.
Average annual gain for the 20 years - 13.80 percent.
Growl now, Dow Jones
So what is the stock market telling us?
The DJIA closed on October 28 at 10,004.32, down 6.83 percent from its closing high for the year of 10,737.70, reached on February 11. The sentiment has been bearish.
With an underperforming stock market, the DJIA could be signaling a Republican victory in Tuesdays election.
Reading the specialists short-sale ratio
On the other hand, the specialists short-sale ratio is telling us a far different story. (See IPO Watch: Market Psychology 101.)
The specialists short-sale ratio is the ratio of the amount of stock shorted (which anticipates a sell-off of the stock) by the specialists on the floor of the New York Stock Exchange (NYSE) to the total short sales. The NYSE reports these figures weekly.
The theory is that when the specialists short-sale ratio rises above 60 percent, it is considered a bearish signal for the stock market.
On the flip side, when this ratio falls below 45 percent, it is considered a bullish signal for the stock market.
For the last 31 weeks from October 8, the date of the latest report, back to March 5, the specialists short-sale ratio has been reported to be between a low of 20.7 percent and a high of 29.9 percent. The sentiment has been bullish.
With the specialists short-sale ratio flashing a bullish sign, this could indicate a Democratic victory on Tuesday - and a change of occupants in the White House in January.
So whatever happens on November 2, there will be somebody, somewhere saying: The stock market told you so.
