Speculative investors boosted bullish wagers on the U.S. stock market to the highest level in almost two years, a sign that some saw the potential for the S&P 500 index to bounce back from a two-month slump.
Net long positions in S&P 500 e-mini futures in the week to Oct. 27 were the most since January 2019, Commodity Futures Trading Commission data show.
The S&P 500 has tumbled from a record in September on risks such as surging virus cases and stalled U.S. fiscal stimulus talks. The gauge fell again last week, dropping 5.6% ahead of the presidential election Tuesday amid lingering concerns of a drawn-out or contested result.
U.S. stock futures fluctuated Monday as investors braced for a volatile week that spans the election and its aftermath as well as a Federal Reserve policy meeting. S&P 500 contracts advanced 0.3% as of 7:55 a.m. in London.
The benchmark equity gauge ended at 3,269.96 on Friday, down a little under 9% from its record close on Sept. 2.
Some strategists argue the S&P 500 can make a run higher from next year, helped by post-election progress on government aid to combat the pandemic’s economic fallout, as well as the introduction of treatments and vaccines.
For instance, BTIG LLC chief equity and derivatives strategist Julian Emanuel wrote in a note that the firm’s base case is “eventual new all-time highs when the correction concludes” possibly in the first quarter of 2021.
Technical analysts are sounding some notes of caution. Strategists Jason Hunter and Alix Tepper Floman of JPMorgan Chase & Co. said the S&P 500 is revisiting a “cluster of support” surrounding the 3,200 level.
Should there be a sustained break below that, it “could accelerate the price weakness and create a more aggressive flight-to-quality flow” that could take the index down to the 2,950-3,050 area, they wrote in a note.
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