The elections

So here we are.  It took six weeks, but Spooz are back at all time highs, albeit in the context of fairly unconvincing price action following the the BOJ gap on Friday.  Although it's a cliche to "mind the gap" in the chart of any financial asset, since putting in its panicky lows on October 15 the SPX has executed no fewer than 4 gaps, all of which have held (the first one re-tested almost to the penny.)

The character of the current one, however, seems slightly different.   Not only did it take the index just through the all-time highs, but it's the first gap that hasn't been followed by impulsive upside price action more or less immediately.  From Macro Man's perch, that's a warning sign that the near-term upside might well be exhausted, and that this gap at least is likely to close.   Not that that's going too far out on a limb; with equities where they are and the first "training wheels are off" payroll coming this Friday, longs who held on during last month's white-knuckle ride would be excused if they took some profits (and remiss if they didn't.) 

With fixed income still "too high" relative to equities and the dollar, it would certainly seem that good news might well be bad news come Friday's payrolls.

Of course, today also features mid-term elections in the United States.  Macro Man generally refrains from commenting on politics on this site.  Long time readers may recall the almighty imbroglio stirred up over the health care debate in 2009, which was sufficiently painful that for a time the site required commenters to register.  Needless to say, your author has little interest in a return to that headache.

Moreover, in his four and a half years of residency in the US, Macro Man's observed that a startling percentage of the population labours under the illusion that other people are interested in their political opinions.  Needless to say, this is usually not the case, and "debate" generally takes the form of interlocutors stating the same thing in slightly different language, ad nauseum.

This appears to be equally true in Washington as it does around a water cooler.

As such, Macro Man sees relatively little prospect for substantial policy change, regardless of the outcome.   Even if the GOP wins the Senate, as seems likely (538 ascribes a 75% chance), they'll have nowhere near the numbers required to over-ride a presidential veto, so Capitol Hill will continue to battle the White House for the honor of notching embarrassingly Pyrrhic victories.

If only the Founding Fathers had adopted one of the tenets of Athenian democracy that is sadly lacking in modern politics: the ostrakon.  Each election, Athenian citizens voted not only for members of the Assembly, but also cast votes known as ostrakons.   The "winner" of this ballot was ostracized, which in Athens meant banishment and forced removal from public life for ten years.

Imagine the fun of choosing whether to chuck out Obama or Boehner, Ted Cruz or Nancy Pelosi.   Now that would be an election that Macro Man could get enthused about!