Morning Notes — Near-Term Narrative

Discount: Equities will likely remain under pressure until the election is completed.  Markets apply an uncertainty discount to upcoming events and will prefer the certainty of almost any outcome next week.  The question is whether that result comes on Wednesday or later.  Market-based measures of uncertainty, including VIX futures pricing and option term premia are priced for lingering uncertainty.  For those interested in moving beyond next week’s election, perhaps the scariest scenario – it’s Halloween eve after all – is an unknown Senate majority that awaits results from a possible Georgia special election held on January 5.  

Witchcraft: Before the recent slide began, we laid out technical support levels for the S&P 500.  The S&P 500 is currently trading below our ~3295 secondary support level, but the close is really all that matters.  A break would bring the mid-September level of ~3220 back into view as the SPX continues to work off short-term overbought status.  Ultimately, we remain focused on levels between ~2950-3050 as easy entry points, but many positions are already creeping toward oversold levels on decelerating price trend momentum.