As if the national elections alone weren’t enough to stir some anxiety in the markets, we have three very important economic indicators this coming week to add to the fray. On Monday, the Institute for Supply Management will report on how the nation’s manufacturing firms fared in October. The report for September showed that manufacturing firms contracted much faster than expected, signaling that the economy had entered recession territory. For September, the ISM index fell to 43.5% from 49.9% — the sharpest one-monthdropin the index since 1984. Then on Friday, the government will report the change in payrolls and the unemployment rate for October as well as the Federal reserves report on consumer credit, both which are expected to highlight a much slower economic slowdown than previously expected. We may very well give back some of the gains of the recent few trading sessions.
Although the markets have come off recent lows strongly, there are obviously nasty headwinds for the markets to deal with before we see any sustainable rallies- we are still in a very dangerous bear market and caution should be exercised by traders and investors alike. Although it is doubtful from a technical standpoint that the markets will retest the October lows , it is not entirely out of the question. Something to watch out for as well is the Nov 15th deadline for redemptions from most hedge funds. The markets are anticipating very large draw downs and even though most hedge funds are prepared for these huge redemptions it may still surprise the markets in the short term.
