Markets to remain range bound until November election: Wells Fargo By Investing.com

Wells Fargo analysts believe the U.S. stock market is likely to remain limited until the November election.

which recently fell 9.7% from its peak in July to its lowest in August, is now caught between key support and resistance levels, according to the bank.

Wells Fargo describes this as “no man’s land,” with the index stuck between support at the 200-day moving average (5,044) and resistance at the 50-day moving average (5,452).

The recent market decline was driven by weak economic data, central bank policy divergence and the unwinding of crowded short positions in the Japanese yen.

Despite this, Wells Fargo believes the S&P 500 remains in an overall uptrend, but significant moves are unlikely in the near term due to geopolitical uncertainty, the upcoming US election and fluid economic and monetary outlooks.

“While we believe the S&P 500 remains in an uptrend, it is now stuck in no man’s land between support at the 200-day move.
average (5,044) and resistance at the 50-day moving average (5,452),” they wrote. that the S&P 500 is unlikely to make significant moves either up or down over the next month.”

Wells Fargo suggests that dynamic investors can still find opportunities in this limited market.

They explain that if the market is headed for resistance, investors should consider reducing positions in less favorable areas such as emerging market stocks and sectors such as Consumer Discretionary, Real Estate, Consumer Staples and Utilities.

Instead, if the market dips toward support, Wells Fargo says investors should add U.S. large-cap and small-cap stocks, along with sectors such as energy, communications services, financials, materials and industrials.

Analysts conclude that while the S&P 500 should find support at the 200-day moving average, rising resistance will likely be encountered at the 50-day moving average, suggesting a cautious but opportunistic approach until the election.