S&P 500; US Indexes Fundamental Forecast – October 31, 2016

Better-than-expected GDP data on Friday helped drive up U.S. equity prices early in the session, but the support disappeared after the news broke that the U.S. Federal Bureau of Investigation was reopening a probe of Democratic candidate Hillary Clinton’s emails.

The recent price action by the S&P 500 Index, NASDAQ Composite and Dow Jones Industrial Average suggests that investors were becoming content with holding prices in range until after the election, but now they have something to worry about.

With Clinton leading most of the polls by a wide margin, the financial markets were shifting their focus away from the election to the Fed. Now they may have to adjust their positions to the possibility that Trump may win the election. This could cause volatility.

Forecast

The FBI/Clinton email probe just 10 days from the election is expected to be the main market driver this week. The Fed meeting on Tuesday/Wednesday may have to take a backseat.

No one is sure what to make of the situation at this time. There wasn’t much revealed over the week-end, but traders are expected to take a cautious approach. Investors will be watching the new polls.

If the new polls show Clinton giving back much of her lead and Trump gaining ground, or closing the gap, we could see another plunge in U.S. equity markets on Monday.

From what I read, there may be some legal maneuvering this week to stall the process until after the election, but I think this is only going to cause more market turmoil.

Facing this new dilemma and given the recent price action, I am fairly certain that investors aren’t going to step in front of this news story so at best I expect to see sideways price action.

In the worst case scenario today, we could see the December E-mini S&P 500 take out bottoms at 2107.75 and 2100.25.

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