FBI Reopens Case Against Clinton as Markets Shudder

Financial markets were rocked on Friday, 28 October 2016 as the FBI director, James Comey announced that his organisation had reopened its case against former Secretary of State, Hillary Clinton. Comey announced a new probe into Clinton’s email use with a letter that he penned to Congress. In his address to Congress on Friday, Comey announced that the FBI had found additional emails that were pertinent to the email investigation of Hillary Clinton. The FBI wants to examine an estimated 10,000 emails for what it deems ‘classified information’. In response to the shock announcement, the chairman of the Clinton campaign, John Podesta had this to say: ‘No one can separate what is true from what is not, because Comey has not been forthcoming with the facts.’

What is surprising is that even GOP lawmakers were critical of the FBI director’s timing. According to unconfirmed reports, the investigation into humiliated congressmen Anthony Weiner prompted the FBI to reopen its case into Hillary Clinton’s email saga. Weiner’s estranged wife, Huma Abadin, is a close confidant of Hillary Clinton, and has been for approximately 20 years. The emails were found on a computer that she shared with Anthony Weiner. The computer was turned over to the FBI as part of an investigation, but the Department of Justice has not issued a warrant for the FBI to review the material.

Financial markets have reacted with shock and horror that just 11 days before the election, the front-runner and leading candidate for president of the United States could be indicted in a criminal investigation. At the time that the announcement was made on Friday, the S&P 500 Index, the Nasdaq Composite Index and the Dow Jones Industrial Average plunged between 12 PM and 2 PM. Markets subsequently inched higher towards the close of the day, but ended approximately 0.3% lower. Prior to the announcement by the FBI director, the S&P 500 Index was up 0.4%.

On the other side of the aisle, Republican front-runner, Donald Trump was elated by the FBI announcement. Trump contended, ‘As you know I’ve had plenty of words about the FBI lately, but I give them great credit for having the courage to right this horrible wrong. Justice will prevail.’ The FBI statement resulted in a one-month high spike in the VIX. The fear index as it is euphemistically known resulted in European futures contracts selling off sharply, but European indices were spared since markets were already closed. According to Deutsche Bank, stocks that it picked for either a Donald Trump or Hillary Clinton presidency also moved lower on the day. The Clinton stocks plunged 1.9%, while the Trump stocks were down 0.2%. The implications of another scandal so close to the election are going to send stocks on a rollercoaster ride in the coming days.­

Trading Opportunity #1 – GBP/USD Pair Holds Steady

The GBP/USD currency pair finally pushed through its bearish phase and attempted to rally on the upside. The critical level for the pair is 1.22, and it is currently trading at 1.21852. The USD weakened on Friday, as market jitters about the FBI investigation into Hillary Clinton rattled the greenback. The GBP/USD pair is now approaching its 5-day moving average level of 1.2204. Thanks to a strong recovery in Asia, this currency pair has bolstered its support at 1.2150 and looks to trend higher. Of course, one of the major factors that will impact this currency pair is the gross domestic product data release in the US. As it stands, the likelihood of a rate hike on 2 November is slim to none, but a December 14 rate hike remains a real possibility. This could reverse the current direction of the GBP/USD pair and drive it lower in coming weeks.

Trading Opportunity #2 – Nasdaq Trending Bearish

 The Nasdaq Composite Index is currently trading at 5,190.10, down 0.50% or 25.87 points. The index has been declining since 24 October 2016 when it was last trading at 5,309.83. A series of poor quarterly earnings reports has helped to drive the index lower. For the year-to-date, the return is 3.65%, and the 1-year return is 4.10%. The 52-week trading range is 4,209.76 on the low end and 5,342.88 on the high end. Of course, the big news for the Nasdaq, the Dow Jones and the S&P 500 is the reopening of the FBI probe into the Clinton email saga. This will likely dominate proceedings for the next week and a half until the election.

According to all the technical indicators, the Nasdaq is a strong sell. The 5-day moving average, the 10-day moving average, and the 20-day moving average all indicate sell positions on the Nasdaq. Binary options traders will do well to go short on this index in coming days. However, if we look at the long-term moving averages, the 100-day moving average indicates a buy for the Nasdaq, much like the 200-day moving average.

Trading Opportunity #3 –Exxon Mobil Stock Drops 2.46%

Exxon Mobil Corporation (NYSE: XOM) stock is trading at $84.78 per share, down 2.46% or $2.14. The company has a market capitalisation of $351.55 billion with a price/earnings ratio of 33.67. The company’s dividend is $3 with a yield of 3.45%. The 52-week trading range for the stock is $71.55 on the low end and $95.55 on the high end. The 1-year target estimate price is $89.45.

On Friday, 28 October 2016, Exxon Mobil Corporation stock plunged after Q3 2016 earnings declined. With profits down 40% and revenues down 13%, the stock was down 1.6% on Friday morning trading. The company earned $2.65 billion during Q3, down from $4.24 billion year on year. The EPS was $0.63 in Q3 2016, compared to $1.01 in Q3 2015. Analysts were anticipating an EPS of $0.58, but this is the eighth successive quarter of profit declines. The stock is trending bearish and binary options traders are placing put options on the stock.

Trading Opportunity #4 – Oil Bulls Tempered by Pressure from All Sides

On Friday, 28 October, oil prices edged 2% lower towards $48.70 per barrel for the largest weekly loss since the middle of September. OPEC will be meeting on 30 November to discuss production cuts. Regardless, the IEA (International Energy Agency) will be announcing US crude oil inventory levels, and then there is also the November 8 US presidential election which will drive oil markets in a big way.

A paper written by economists from Brookings posits that a Trump election victory will result in a decline of $4 per barrel for WTI crude oil. A Clinton presidential victory is perceived to be a market stabilizer. Friday’s closing price for WTI crude oil was the first loss in 6 weeks. It underscores the bearish sentiment that exists in the market. As it stands, WTI contracts are likely to end the month with anaemic gains of just 1.1%.