What’s Happening? The big advance staged by SPX through the spring has been running out of gas since July. So far we haven’t had the usual seasonal correction but the risk of a pullback continues to increase, particularly with USD still advancing and earnings season starting this week. Technicals: After completing a double bottom back in February, SPX staged a strong advance through to April initially, than after a pause, a second leg up in July. Over the last three months, a head and shoulders top has been forming with a textbook rising neckline to boot. In recent weeks, advances have been contained by the 50-day average, carving out the right shoulder. Meanwhile, a trend of lower highs since April that started with a negative divergence and had since led lower highs for the index, reflects a shift from accumulation to distribution. Currently resistance is in place near 2,175 with more near 2,195. A break of 2,140 would complete the peaking pattern and signal the start of a new downtrend. A break of the RSI under 50 would also signal a downturn. Next potential support may appear near 2,122 rising channel support, of 2,100 where a round number, 23% retracement of the previous uptrend and the September low all converge. Fundamentals: The way that the S&P’s advance has stalled over the next three months suggests that it has been fully priced based on current expectations for the US economy, corporate earnings growth and expectations that the Democrats will win in November, maintaining current economic policies and spending plans. The risk of a correction has been growing as the number of items that could lead to a correction grows: 1) The US Election – Trading in the SPX following the first three debates indicate that the market has pretty much priced in a Clinton win. There is a risk, however, that polling for Trump may be running lower than his actual support, and that the election could be a much closer contest than trading suggests. Sound familiar? The markets appear to be the same mistake in getting too complacent just like they did about Brexit back in the spring. Any signs of Trump regaining momentum could rock the markets. 2) Earnings season – High stock prices mean high expectations for corporate earnings. It’s possible though that the close election could cause businesses to delay spending decisions. Alcoa has already kicked off this earnings season with a miss and guidance cut. More misses or murky guidance could send stocks sliding south quickly. 3) Economic News and Fed Speculation – One of the big headwinds holding back US stocks lately has been a major rally in the US Dollar (negative for corporate earnings) on speculation the Fed will raise interest rates in December. I still think November is unlikely unless the Fed is looking to make some sort of election surprise and fight off political criticism. This week features a number of Fed speakers again, most notable NY Fed President Dudley, plus minutes of the last FOMC meeting. US retail sales on Friday may indicate if the election is having any impact on consumer spending. CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.