From a technical perspective yesterday’s rally was particularly interesting (see inset), since it left the E-Mini S&Ps sitting somewhat above a key resistance at 1420.75 that I’d flagged in an earlier trading tout. In theory, E-Mini’s settlement 5 points above the resistance implies that a major rally equivalent to as much as 800 Dow points could be brewing.

In that context, consider that a Democratic victory in a presidential election typically produces a 2.5% decline in the broad averages; a Republican victory, a 2.5% rally.  It is of course a wild leap to call the election on the basis of speculatively bullish price action near a middling Hidden Pivot resistance, and so I’ll resist the temptation to do so.  Readers who have gotten this far will perhaps pardon me for a little bit of Hearst-inspired sensationalism in the headline.  _______ UPDATE (12:43 a.m. EST):  Since I am unable to imagine an Obama rally, I’ll be paying very close attention to the way in which the ostensibly bullish set-up described above plays out. The very first credible sign of trouble would come today on a  1409.50 print, since that would generate a bearish impulse leg on the hourly chart. ________ UPDATE (10:20 a.m.):  A 2.5% decine would bring the Dow down to 12913, about 35 points beneath the low created by today’s so-far 230-point fall.  Since I can scarcely imagine the stock market declining a measly 2.5% to discount the actual Death of America, I’ll continue to monitor my technical indicators closely, and to trust them over my gut instincts. FYI, the E-Mini S&Ps, currently trading near 1400.00, project to 1364.75 over the very short-term.  This implies a drop in the Dow of 500 points — twice the current amount.