Photograph by Damian Morys
3:22 p.m. We’ll know who won the midterm election tomorrow. We won’t know how the market will respond, even as it looks to close higher on Tuesday.
It’s at times like these that we like to look to charts to help us think about what might come next—charts like this one of the S&P 500:
Depending on whom you ask, it’s either a prelude to further selling or a sign of a rally to come. this take from Vermilion Research’s David Nicoski illustrates the former: “This market is still fighting an uphill battle following the S&P 500 breakdown below its 200-day moving average—a level that is now acting as formidable resistance.” Evercore ISI’s Rich Ross, writes that his “job is to highlight the Double Top in the S&P,” and sees the possibility of a 15% correction to 2500.
But wait. Before we go and sell our stocks, other technicians are much more optimistic. Fundstrat’s Robert Sluymer, for instance, argues that “while the market reaction to U.S. midterm elections remains a near-term wildcard, intermediate-term/weekly momentum indicators, tracking the multi-month shifts, are showing early evidence of bottoming.”
Words like market ‘selloff’, ‘crash’, ‘meltdown’, and ‘correction’ have been bandied about by traders and analysts in ways that can make investors cringe. Here’s what you need to know.
Who is right? I wish I knew. I staked my flag in the Trader column this past weekend, arguing that the market could be set up for that 15% correction. But the markets are unpredictable, and