Tricks, Not Treats

Apparently the markets were in the Halloween spirit last night and decided to play a trick on us, dropping close to six percent across the board. Ouch!

This massive spike in volatility has blown up a lot of technical patterns. September started the mess with more than a 10 percent pull-back from peak to trough prices. From September 24th to October 12th the S&P 500 began the climb out of the slide, nearly recovering all of September’s losses.

Those last two weeks though. Yikes. The SPX gave up all the nearly all of the gains to re-test the September lows… and although the intra-day lows didn’t quite dip lower, this trend is anything but over.

This week is likely to be messy. Only the boldest of analysts would try to call anything this week. And that is probably more bravado than skill, as the data is all over the board.

And, of course, there’s another tiny little detail we’re watching (where is the sarcasm font when you need it?): the election.

It’s entirely probable the election will not be decided this week. Across the country there are legal battles over the deadline for mail-in ballots and how they should be counted. Any close race in a key battleground state is likely to be met with lawsuits.

With this much unknown it is silly to try and call the outcome. History has show that polling data is not meaningful enough to get a good handicap on an election. And covid has changed the way we vote. In some areas its reported that mail-in ballots have exceeded total ballots cast in 2016. So, who knows?

Given the radical uncertainty this week, to call it a sideways pattern is a cop-out. But to put numbers to this seems equally silly. The ‘support’ level for the SPX is at the 200-day moving average, down at 3129… that’s over four percent lower than Friday’s close. Resistance is an equally silly number, up at the 50-day moving average at 3402, over four percent higher that Friday’s close.

So, plus or minus four percent… it sounds outlandish, but those are the numbers. It shows just how tough it is to handicap this market in the short-term (especially given an election during a pandemic in the midst of government lockdowns, stimulus, and quantitative easing).

So, for the week, the professional advice is: hang in there. This could be a wild ride.

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