September 24, 2020
Election uncertainty and a failure by Congress (thus far) to agree on a fiscal relief package have combined to pressure markets lower. Election uncertainty will be with us another month at least with contested election results quickly becoming the consensus view and now being priced into markets. The S&P 500 is off ~10% from its 9/2 high, November/December option premiums are very rich and individual equities’ short base has increased by ~30% over the last three weeks. While there’s more room for short-interest to rise, option term premiums look stretched and we expect the S&P 500 to hold support at 3220 before moving higher and ultimately testing levels from 9/2.