S&P 500 Index: Choppy action prior to US elections – Charles Schwab

The S&P 500 Index has rebounded off September’s correction but has also pulled back from October’s highs around 3,550. Nathan Peterson from Charles Schwab expects the index to remain rangebound while the VIX is set to stay within a 25-30 range as well.

Key quotes

“The VIX has been in a trading range of roughly 25-30 over the past six weeks and it’s likely to stay within this range until after the elections.” 

“If there is uncertainty around the outcome of the elections this could result in an uptick in the VIX, but it feels to me like the higher probability is that the VIX heads back down towards the low 20s by mid-November, and potentially even lower than that (18-20).” 

“It’s difficult to predict how things will play out exactly, but it seems to me that the majority of market participants have a) already hedged or b) have set their expectations for a volatile market environment, which buffers the ‘surprise factor’ and therefore makes a less volatile outcome more likely in my opinion.”

“It feels to me that the most likely scenario between now and the elections is that the S&P 500 remains sandwiched within a range of roughly 3,400 (which coincides with the 50-day SMA) and that October high of 3,550, so my near-term outlook calls for choppy, sideways action.”