Theresa Perrin
Self-Directed Investor & Trader, Former Hospice Nurse
ETRADE's post-midterm return history and the prospect of political gridlock point to higher US stocks. The S&P 500, Nasdaq 100 and Alphabet should rise regardless of the election outcome. ETRADE says gridlock limits sweeping tax, regulatory and spending changes; under a Republican president, it reports average next-calendar-year S&P 500 gains of about 16% with Democratic control of Congress and 23% with split control. Strong 2026 gains may limit further upside, particularly in tech. x.comÂ
The S&P 500 remains very strong, up 11.7% this year and just 2.27% off its all-time high, despite a war, 10-year yields at 19-year highs, AI fears, a Fed rate hike and September's weak seasonality. The next week or two will be key to whether it breaks out to the upside. Whether the 10-year yield stays below 5.00% is a key factor, and tech leadership into week's end was a strong initial sign. x.comÂ
The S&P 500 is vulnerable to a midterm-election drawdown, since history shows nasty 7-16% declines almost always come around midterms. Elevated 10-year yields and a strong dollar add risk, even though nothing looks bearish yet and rising yields have not dented the Nasdaq or mega-caps, and cheap volatility makes hedging attractive. SPY could reach $800 and still fall back to $750 within two months. x.comÂ
SPY's current pullback looks brief because whale accumulation remains above the level associated with mid-term trend continuation. The reading is 87.74%; it fell below 80% before both recent major crashes. Barring a black-swan event or major unexpected fundamental shift, this decline looks closer to earlier minor corrections. The stock market still has significant upside, and fear-driven discounts remain opportunities. x.com x.comÂ
US large-cap equities are at the point in the cycle where a violent, fast snapback rally is due, with the S&P 500 well off its highs and Nvidia and Meta down sharply. The best days almost always follow the worst, and missing the 10 best days cuts long-term returns in half. Selling covered calls now, effectively a bet against the stock, locks investors out of the recovery for a few hundred dollars of premium. x.comÂ
A new SPY low alongside a lower VIX high often, though not always, signals a near-term reversal. A roughly 30% VIX jump makes a shallow rally likely Monday or Tuesday, but after breaking below yesterday's low following a trend-line backtest, SPY still looks headed for $750 soon. x.com x.comÂ
The S&P 500 rally likely has a few more days worth staying exposed to, because SPY's cumulative advance/decline line is still below its all-time high. The A/D line turned up at the end of March and its trend remains positive. The Fear & Greed Index keeps climbing, though, so it may be time to start dialing back exposure. x.comÂ
US large-cap equities should keep rising because tailwinds far outweigh headwinds, making any dip a buy. Endless money printing inevitably flows into equities, the AI revolution is arriving with robotics close behind, and S&P companies are reporting surging earnings beats. The AI and robotics revolution isn't remotely priced in, as labor costs trend toward zero while corporate profits keep rising. Elliott wave calls for a historic top miss this broader picture. x.comÂ
SPY and SMH face a headwind from the US government's issuance of $237B in bills and notes today, per Muse; that issuance is not expected to help either exposure. x.comÂ
Hyperscaler credit stress and weak financials-versus-staples leadership warn of downside risk in the S&P 500 consolidation. Spreads have broken July wides, though an upside breakout is probable if financials stabilize. So far, tech weakness has lowered yields as Fed hikes are priced out, letting defensives rally and the S&P chop. If the Fed signals Nasdaq weakness won't stop tightening without better data, the tech-yield link could break in an uncomfortable, 2018-like direction. x.com x.com … Show more