Market Brief – Tuesday 11/06/18

Trading volumes collapsed today as large money managers and traders wait for the election results. Retail investors continue to bid stocks higher based on all the articles showing how stocks tend to rally following midterm elections. While I haven’t had time to go back and look through the data points, I’m guessing not many of those post-midterm rallies were during a Fed rate hike cycle. Look for the large traders to sell against the recent buying by the public.

For all the investors who have said interest rates are going straight up and that foreign investors are shunning Treasuries, today’s 10-year Treasury auction saw 73.8% of the $27 billion tendered go to foreign bidders, which is a record high. Clearly, foreign central banks and investors are seeing something domestic investors aren’t.

Tomorrow the U.S. Treasury is auctioning off 30-year bonds, which will likely show strong foreign demand. Even though investors kept trying to press yields higher today, strong foreign demand will bring yields down.

Physical gold sold off a bit today as sellers remain strong at $1,240/oz and buyers remain strong below $1,200/oz. Knowing where the buyers and sellers are at is helpful when determining an entry point.

The major indices ended the day higher, but with trading volumes so low due to the midterms, today’s price action doesn’t offer any clues for what may come as the election results come in. Ten- and 30-year Treasury yields were slightly higher on the day. API reported a large build in crude inventories, which has sent oil prices down in after-hours trading. Since rising oil prices have been the excuse for rising bond yields, bond yields should follow suit. If you want to know what the markets think of the outcome of the election, keep an eye on the futures market tonight.