The US stock market showed signs of a potential correction as major indices closed lower for multiple consecutive sessions. The S&P 500, Dow Jones, Nasdaq100, and Russell 2000 indices all saw losses, indicating a possible shift towards a correction or even a bear market. CNN’s Fear and Greed Index has been in the 70-75 range since late September, indicating extreme greed in the market. A market correction often follows a pullback from highs into neutral territory.
The VIX volatility index spiked above 20 in early October, signaling increased nervousness among investors. While these levels are lower than typical for this time of year, they are slightly higher than in US presidential election years. The upcoming weeks leading up to and following the election are expected to see heightened volatility in the markets, which often corresponds with declining prices.
Market analysts are closely monitoring the RSI and price divergence for the S&P 500, which is currently experiencing an extended period of uncertainty due to the close race between the candidates. The price of the S&P 500 is significantly above the July peak, while the RSI peaked at 70 before falling back to 59. These indicators suggest a potential downward trend in the market in the coming weeks.
The risks for financial markets in the near future are leaning towards the downside, with the Fibonacci pattern pointing to a potential correction target of the 5600-5700 range for the S&P 500. It is crucial for investors to monitor market dynamics and be prepared for increased volatility in the weeks surrounding the election. By staying informed and diversifying their portfolios, investors can mitigate risks and potentially capitalize on market fluctuations.
