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Why stocks may be set for a huge move in the weeks ahead

Fresh off of the worst month since January for the S&P 500, the market could see further volatility in the weeks ahead.

"On a near-term basis, obviously anything can happen with the election coming up, and if [Republican nominee Donald] Trump ekes one out here, it could have a negative impact on the market," Miller Tabak equity strategist Matt Maley said Monday on CNBC's "Power Lunch."

"But on a longer-term basis, I'm a little bit more concerned because I just think all three of the main stools to the markets really aren't as strong as they were earlier in the year," Maley said, citing less accommodative central banks, the upcoming election and sluggish economic growth.

Maley wrote in a recent note about something he refers to as "performance fear" — the market has been stuck in a particularly tight range for almost four months, he wrote, and the market tends to see a big move when breaking out of a multi-month range. The market also typically sees a big move after presidential election, he wrote, so should the breakout come to the upside, "it could lead institutional investors to jump on the bandwagon…no matter what their long-term view may be," and a significant year-end rally could be imminent.


Examining a chart of the S&P 500 going back to early 2015, Maley notes a range that began to form this June between the 2,128 level and 2,200.

If the market breaks below the lower end of this range, this could lead to a move below its 200-day moving average, which is at about 2,079.

Boris Schlossberg, managing director of foreign exchange strategy for BK Asset Management, believes the election is truly what is keeping the market relatively quiet.

"I think the critical concern is just the election. I think the market right now is basically on pause," Schlossberg, managing director of foreign exchange strategy for BK Asset Management, said Monday on CNBC's "Power Lunch."

"Only after that can they get some clarity as to where the economy is going to go."

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Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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