October 2024, the S&P 500 has been on an impressive 4-week rally, hitting its 46th record high for the year on Monday. However, on Tuesday, 15 October, the index experienced a sharp decline of 0.75%, the largest drop in two weeks.
The main culprit behind this sell-off was Nvidia, the second-largest market cap stock in the S&P 500, which saw a significant drop of 4.68%. This decline was triggered by ASML, a bellwether semiconductor chip-making equipment firm, issuing a downgrade to its revenue guidance for 2025. ASML’s shares plummeted by 16%, marking its worst daily performance since 1998.
Adding to the market’s woes was the resurgence of US trade tensions with China. Donald Trump, the Republican presidential nominee, reinforced his support for higher tariffs on China and other global exports to the US during an interview with Bloomberg News. This narrative has reignited concerns among investors and contributed to the weakness seen in major US stock indices.
As the US presidential election approaches on 5 November, betting markets are indicating a lead for Trump over the Democratic nominee, Harris. This political uncertainty, coupled with the ongoing trade tensions, has created a sense of unease in the markets.
### October Recorded the Highest Level of VIX During Past US Presidential Election Years
Historical data from US presidential election years since 1992 shows that the VIX, a measure of implied volatility in the S&P 500, tends to spike in the months leading up to the election. In October, the VIX reaches its highest monthly average of 25.97, signaling increased market volatility and the potential for a risk-off episode.
### VIX Is Now Showing Outperformance Conditions Over the MOVE Index
The MOVE Index, which reflects volatility in US Treasury futures, has surged above a key resistance level, indicating heightened market uncertainty. The VIX, while not yet breaking its resistance level, is showing signs of potential upside. The ratio of VIX/MOVE has also signaled outperformance conditions for the VIX, suggesting a possible increase in volatility ahead.
### Watch the 5,930 Key Resistance on the S&P 500
Despite the recent record highs, technical analysis of the S&P 500 CFD Index indicates signs of exhaustion. The index is approaching a key resistance level of 5,930, and a break above this level could signal further upside potential. However, with fatigue setting in, caution is warranted as the market navigates through uncertain political and trade dynamics.
In conclusion, the recent market movements and geopolitical developments highlight the importance of staying informed and vigilant as an investor. Understanding historical patterns, technical indicators, and external factors can help navigate the current market environment and make informed investment decisions. By staying attuned to these trends and developments, investors can better position themselves for potential opportunities and risks in the ever-changing financial landscape.