As the world chugs back to normal after another roaring hot summer, one thing is for certain, there is nothing normal about this market.

If you were to trace back through my S&P 500 (NYSEARCA:SPY) calls you could say I have a history of “understanding” what this market is trying to do, however at the time of writing this article, the future direction may not be so easy to analyze. Significant events to follow this month lend the feeling that although technically set up to break the all-time high of 5670, one gets the impression that the market is on tender hooks and could also implode just as much as explode.

An already divided world appears to hang on a hinge with the November election looming large but ever nearing over the horizon and the volatility we have seen of late can be attributed mainly to that fact as the market hit a high of 5670, made a reattempt at that number only to fall off.

We must remember that this daily volatility essentially since the pandemic is the new normal. Just a decade ago, you had to look to the non-farm payroll announcement on the first Friday of every month for volatility, a good number could see the market move twenty points, a figure of which now it moves on its day off.

In fact, I remember the S&P 500 in grind higher mode, where the index could move a mere three points in a day. Just ten years later and a one hundred point move is not out of the question in a trading session.

The reality is, this will be some couple of weeks ahead, and we can expect more of the same volatility-wise. Tonight’s Presidential debate will kick-start what is surely to be a wild week for financial markets. Tomorrow, August’s CPI data will be released and then lead into the Federal Reserve meeting on the 17th and 18th of this month.

The Fed

Chatter is growing that the Fed may press the panic button with a 50 bps rate cut among fears that they left rates too high for too long, the Fed is not known to “panic” and a 25 bps rate cut could be more likely. However, if a 50 bps cut were to be announced, the market could perceive this as an admission of “leaving rates too high too long” and we could see a major sell-off as a result. This in particular will be interesting to watch. The upcoming CPI data could have a dramatic effect as the Fed tries to navigate this delicate balance correctly.

“It’s the Economy Stupid”

It appears that one candidate in the race for the White House has been open about their plans for the economy, while the other side hasn’t been proactively portraying their stance. This, of course, may change, but it is a common saying that “financial markets like certainty” and we must wonder which side is the more “certain” as of today – tonight’s debate could confirm more. If a situation arises that a side of the Presidential ticket could take the White House without convincing financial markets of a clear plan, we could see a total implosion. If we see a clear plan from either side that markets believe is business as usual or “certain” we could see a return to bullish explosion. Whatever way you want to look at it, this starts tomorrow.

Readers who follow my analysis will know that as the S&P 500 broke 5275, I initiated a call for this index for firstly 6000, then 6500. So far, the market has peaked at 5670. Technically, it remains within the realm of, 5100-5670. However, after that initial attempt at resistance, we saw a sell-off to that 5100 region, particularly on the weekly chart, the market has reset itself by driving upwards to 5650 before falling off again, this has actually created a path now directly to 6000 should 5670 be broken. When a financial market cannot get through resistance at a first attempt, it must create another buy and sell pattern by printing another structure consisting of bullish candles vs bearish up to and off resistance if it is going to break through finally.

This past week saw a near 300-point sell-off, which shows us that this volatility has some ferocity. Should 5100 be taken out, the market could look for the 4900/4600 region as a next stop. Although technically set up to go higher, significant events not to its liking could lead to a quick implosion.

To finalize, I cannot say I expect, but can say the technical setup is there to take the S&P 500 to 6000 directly if 5670 is broken above. I have previously pointed out that the index is in a wave firstly to that number on the monthly chart; however, a financial market must also make its way north or south on all timeframes now of which the reattempt pattern is printed within the structure on the weekly chart. When I say I cannot say I expect, it is because as of right now, the only thing that is certain is the uncertainty.