Financial Union Network, News on October 21st (Editor Liu Rui) As the US presidential election approaches, the market is paying more attention to the recent volatility risk of US stocks.

Recently, according to Mark Newton, the technical analyst at Fundstrat, purely from a technical analysis standpoint, it is expected that the US stock market may experience a 7% pullback by mid-November.

US stocks may experience a short-term pullback.

In fact, historically, in most election years, US stocks tend to experience pullbacks in the period before the US presidential election. However, based on the performance of US stocks so far this year, it seems that US stocks have temporarily "escaped a disaster" this year. However, Newton believes that investors should not assume that the trend of US stocks this year will not encounter obstacles.

Newton wrote in his report that as US stock investors' confidence reached a complacent level before the November 5th election, he expects the s&p 500 index to weaken by the end of November.

Newton said, "Although the midterm bullish trend remains basically unchanged, it is doubtful whether the US stock market can continue to rise without any consolidation before and after the election."

However, Newton stated that the pullback US stocks may experience is likely to be a "short-term pullback" and "not the beginning of a larger-scale decline"—which also aligns with the consistent view of Tom Lee, co-founder and research director of the "Wall Street Wizard" Fundstrat, that investors should view any decline in US stocks as a "buying opportunity on dips".

The key resistance level is just around the corner.

Last week, the US stock s&p 500 index rose by 0.85% in total, closing at 5864.67 points by last Friday, setting a new historical high. Newton stated that he is closely watching the 5900 point level of the s&p 500 index, believing that this round number may be a key resistance level for the index.

"Recently, the market has shown complacency (judging from the put/call levels of stocks), weakening breadth of stock rises, deteriorating seasonal trends, November's cyclical factors, as well as the recent poor performance of the largest sector in the s&p 500 index - technology stocks. These are all reasons to stay vigilant about possible trend changes in the coming weeks." Newton explained.

He also mentioned a "key reason" for turning bearish on US stocks in the short term: the current rebound in US stocks that started in early August has lasted for 88 days, which coincidentally is the same duration as the rebound before the previous selloff in US stocks: from April 19th to July 16th, US stocks experienced a cumulative 88-day rebound, followed by nearly half a month of selling.

Newton believes that from a timing perspective, this is the "reason why this round of rebound may be losing momentum".

Editor/ping