Scott Redler: Multiple Scenario Analysis Ahead of the Mid-Terms

We're ahead of the biggest political event since the 2018 Presidential election.

It seems like a Democrat House and Republican Senate would be equities friendly. 

And as long as we hold the SPX 2700 area, I'll be positioned for it to clear 2756 for a move back towards 2816-2840.

But if that rally happens, don't rush to buy into bull hype too quickly. Seasonality and buybacks may be on the bulls' side, but there's a bigger pattern to worry about. (more on this below)

If the Democrats take the House and Senate, volatility probably spikes.

A close of below 2700 would probably mean a retest of 2603.

As you can see on the micro chart below, an inverse head & shoulders may be setting up. The election results may dictate if the pattern resolves up, or if the right shoulder gets broken for that 2603 retest.

Now let's look at a more intermediate-term chart. 

If 2603 gets lost, traders will start worrying about a trip to 2560 - 2580, and a rougher road to end 2018 and start 2019. 

A rally from here could complete the right shoulder into 2800-2840, making 2600ish the neckline.

If this pattern triggers to the downside and the neckline breaks, the measured move points to 2300 -- which could be a 2019 story

Positions Disclosure: As of November 6, 2018 at 10:33 a.m. ET, Scott J. Redler is long FB, AAPL, SPY, IWM