As the Presidential Election takes place this week, Todd Gordon, Founder, Inside Edge Capital and TradingAnalysis.com takes us through some potential moves in the S&P 500.
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00:00Do you want me to get into the first thing Monday morning in election week? You want me to get into
00:04the into the gory wave and fib stuff? Or do you want to keep it high level? There's there's two
00:10scenarios I'm looking at here in the S&P. So this is the S&P daily. And there's no doubt even if we
00:18take all the labels aside, I mean, we're scraping the upper end of a channel from the 22 lows,
00:24right? We have pretty significant momentum divergence going on here. We had late 23 really
00:30high RSI in the daily, summer 24 right before August sell off really high RSI. So there's two
00:38scenarios that I'm laying out with with our wealth management clients and our research clients.
00:43I think regardless the way the market's acting, the odds are some kind of pullback, either relief,
00:52either just profit taking into whatever political combination unfolds, or if there's uncertainty,
00:59and we don't have a president, we don't know. I think there's potentially a sell off coming.
01:10The other thing I'll note that the VIX, you know how like pescally, that's not a word,
01:16but I'm just going to use it. I like the word. We have better words on this show.
01:23I know why, but if you notice, it's just 21, 22, 22 and a half bid. That's high for the market,
01:30what, two, 3% off all time highs. And it's clearly the election, right? So is it pricing in
01:36uncertainty, an uncertain outcome? Is it profit taking coming in regardless of what happens?
01:42Longer term, I'm very bullish on this market. I like where earnings are. I like where rates are.
01:47I like where the yield curve is. We just got to get through this insane political environment.
01:53And then if we can get through it, and then look right away to November 7th,
01:57which is the next Fed meeting. But I think I'm starting to prepare for a move down to 5,400 to
02:045,200. Or if we don't, things go really sideways. I just can't help but think that we never tested
02:18the late 22 breakout level at 4820 or so. Do you guys, and I'm asking you guys, do you have a
02:28problem that we never really retested that breakout level in the S&P? We did in the NASDAQ,
02:32but not in the S&P. Joel, I'm throwing that one to you. He's the technical analyst here.
02:38I don't really have a problem with it because I've waited for a lot of gaps and a lot of
02:46retests to happen, and they never happened. So that's just my overall opinion. I try and look
02:54at a little bit more forward. Can we hold last week's low? And if we don't, where are we going?
03:02But going that far back and saying, wow, I wish we would have went and tested that,
03:08that's just the way I'd like to look at it. Okay. So what I'm laying out with our research
03:15and our wealth management customers and those who want to hedge, that using the wave model,
03:20which is not perfect, but it's a great way just to give me guidelines and framework. And it's not
03:25the grail, nothing is, right? But I feel like in either scenario that I'm laying out, if things go
03:32sideways, generally the market drops sharply on whatever the initial catalyst is. We rally to a
03:37lower high, false hope, people trying to buy the pullback to then go get stopped out, blah, blah,
03:44blah. So I'm wondering if there might be on any kind of downward adverse reaction, 5,600 down
03:54into the 5,000 mark is something we need to be concerned about in the next month or two.
03:59What's the catalyst, Todd, that would take us there? Election uncertainty maybe,
04:05is it like China, fears geopolitical? I always think about, and I love having targets and I look
04:11at the charts to think about where we're going, but I often start with what's on the horizon?
04:16What are we not seeing? If you're seeing a significant correction, it's got to be a
04:20catalyst for that too. What if the election goes smoothly,
04:24there's no protests, there's no horrible events. Democracy unfolds as it should. And then the Fed
04:32comes out on what, Thursday and says, you know what, maybe to come out really hawkish and say,
04:38we're in pretty good shape. And maybe, let's say Trump comes in, he's viewed to be pretty
04:44inflationary because he's a protectionist. He wants onshoring, reshoring. You look at the
04:49outperformance in the small cap sectors to the market, maybe the Fed can't be as dovish as they
04:54want to be.