The 2024 Presidential election in the United States is causing uncertainty in the financial markets, as the outcome can have a significant impact on the economy both domestically and internationally. The stock market, being an economic barometer, is closely watched to see if the election results can potentially crash the US stock market. In a recent analysis, it was found that the index could still be wrapping up a counter-trend rally, with a potential target of $20,600. The index did indeed reach this target before declining, indicating that the red W-b/ii setup is still in play. However, the Bears have yet to push the index’s price below the October 1 low, leaving room for a potential Bullish setup in the charts.
It is important to note that the NASDAQ made a new all-time high last week, which contradicts the red W-b/ii setup for that index. The NASDAQ and NDX are often closely related, and if the Bears cannot hold the index’s price below the July all-time high, an alternative Elliott Wave count known as the “ending diagonal” may be in play. This pattern typically involves a 3rd wave targeting the 1.236x Fibonacci extension of the 1st wave, followed by a correction (4th wave) and a final 5th wave. The NASDAQ seems to be following this pattern, but it is contingent on holding above the September 6 low.
Market breadth readings and sentiment indicators are showing signs of being oversold, which could indicate a potential reversal to the upside. The McClellan Oscillator, Summation Index, and PMO are all at levels where previous buy signals have occurred, while sentiment is fearful. This suggests that the path of least resistance for these indicators may be upwards, potentially propelling the indexes higher. However, it is crucial for the Bears to break below the October 1 low, especially the September 6 low, to confirm their thesis of a multi-year top forming.
Overall, while the Bears still have a chance to push the index lower, the Bulls may gain momentum if key support levels are held. Market breadth and sentiment indicators are pointing towards a potential bullish movement, possibly leading to a “dead cat bounce” in the stock market. With the uncertainty surrounding the 2024 Presidential election and its potential impact on the economy, investors will need to closely monitor market trends and key support levels to react accordingly to any fluctuations in the stock market.
