Pre-Election Crash

Taking a long view, the S&P is currently 3 standard deviations away from the mean. Even without additional economic headwinds, mean reversion would be likely. Add to that massive unemployment, COVID not being contained, social unrest, and an election that could flip Congress and the White House to the Democrats (regulatory uncertainty) and you have a recipe for a large swing down. This could take months to play out or could start when Q2 earnings come out (if worse than expected).

Elliott Wave traders see the top back in Feb as a top on three large scales. This would make COVID Crash an A wave, the recent run up a B wave (a double zigzag), with the C wave down yet to come. A waves and C waves tend to be of equal length, which would put the S&P around 1800. But considering how long the market stayed 3 standard deviations above the mean, in order to hold the long term mean, the market could fall further or stay down for some time.

Additionally, we are making lower highs. The peak in July is lower than the June peak, which is lower than the Feb top. If we get a new low that takes out the June low around 2950, I think that would confirm the downtrend. If we move above the June highs, then the uptrend could continue.

TINA (There Is No Alternative): of course there is. Cash is king when assets depreciate. And bonds could rally more if the Fed moves rates negative like elsewhere in the world.

But the Fed/Treasury! Hoping the government props up the stock market isn't a great investment strategy. The support has to end sometime and people will get pissed if billions are handed out to support the market when so many are unemployed.