The US election results provided yet another dimension to the notion that we are presently living through historic times. As an observer from afar, but one who lived in the US for many years, my strong intuition is that Obama has to confront some of the most challenging set of circumstances ever to face an incoming President. Let's hope that the expectations have not been set unrealistically high.

Election day kicked off with some very keen buying throughout European equity markets but (as seen below) the major indices moved up to clear overhead resistance. There was also the suggestion that a lot of cross asset play strategies were being implemented as the dollar sold off, oil moved higher and the materials sector continued to bounce on the idea that the selling was overdone in late October.

The S&P 500 (^SPX) has completed a substantial portion of the recovery that I have anticipated, and we could see a consolidation effort before the next attempt to regain the 1060-1070 level.



The FTSE completed in yesterday' session an almost text book example of a recovery to the 50-day EMA. In Wednesday's trading, not surprisingly there has been a setback of more than two percent, and UK traders will be looking for direction later in the session from the way the US markets react to the election.

Anecdotally I cannot recall a US election which has been followed with so much interest on this side of the Atlantic and where, to put it succinctly, there is widespread feeling that the outcome was what most people were hoping for.



Germany's DAX did not quite return to the 50-day EMA which lies at 5400, but as the chart below indicates, the index managed to pierce above the 38% retracement level of the June 08 high and the October 08 low.

In general terms the pronounced "V" shaped rally now looks in need of a rest.



While traders seemed keen to chase the large cap stocks in yesterday's rally, there was a noticeable under-performance by the Russell 2000 (^RUT).



As anticipated here yesterday, the "V" shaped recovery in the price of emerging sovereign debt continued yesterday, as reflected in the performance of the sector fund PCY. The pattern suggests that this would be a good place to take profits if you have been long, and any spike up to the $20 level would be worthy of consideration on the short side.



The MSCI Emerging Markets index is accessible via the exchange traded fund EEM which looks to be in a basing pattern with scope for further progress to the 50-day EMA.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

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