Will the Election Give the Market What It Wants?

Markets hate uncertainty, and the uncertainty about who will lead the country, and how, ends with Tuesday's election.

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The election could be a turning point for markets and the economy. The tight race between President Barack Obama and Republican rival Mitt Romney has made for a high level of anxiety, and on Friday, traders quickly shrugged off a better-than-expected October jobs report and shifted focus to the election. (Read more: Unemployment Report: Final Fodder for Election)

Stocks sold off Friday but were flat for the week, which was cut short by Super Storm Sandy's two day closure of trading. There were slight losses in the Dow and Nasdaq, and a slight gain in the S&P 500 . The S&P 500 lost nearly a percent Friday to 1414, reversing Thursday's gain. (Read more: Stocks End Near Lows; Apple Tumbles 3%)

"I think a lot of what's happening today is probably investors taking advantage of yesterday's rally, not wanting to hold through the election, and waiting for what the market does after the election," said Gina Martin Adams, institutional equities strategist at Wells Fargo Securities.

Adams noted the S&P has been trading under its 50-day moving average, of 1434, and it tested it again Friday. "The market seems to have decoupled from economic and earnings data," she said. "We keep getting positive economic data and earnings revisions have actually gotten less bad, but that's not enough to keep the market in an upward trajectory. It's probably a combination of uncertainty to do with the election and just plain technical." (Read more: What the Jobs Report Says About the Housing Market)

She pointed to the divergence between the Dow industrials and the transports, and also the fact that copper, a leading indicator of economic growth, has been lagging.

Romney is Wall Street's favored candidate for his position on taxes and fiscal policy, but the tension around this election is especially high since the candidates continue to run neck and neck in the polls. But regardless of who wins, analysts say it is important to end the lack of clarity on what direction Washington will take on tackling the country's fiscal challenges.

"If it's your big event, it's going to be hard to position one way or the other," said David Ader, chief Treasury strategist at CRT Capital. "We're going to have this critical piece of information. In my own view, what happens Tuesday could set the tone for the next four years. I'd rather trade the four-year trade than the one-month piece of data. It's a very big deal."

Earnings from retailers, like Macy's and JC Penney and media companies, like Disney and Time Warner, in the coming week should not have much bearing on trading. Nor will the handful of economic reports, including weekly claims, consumer sentiment and trade data. Investors will also be watching the recovery after Super Storm Sandy, which slammed the east coast.

Earnings on Tap

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