Source: Wind
Although the US stock market is expected to rebound in the short term, technical analysts observing the price chart warned that the adjustment is not over yet.
US stocks rose after opening, continuing yesterday's gains in an attempt to rebound or at least stabilize after falling last week. Last week, the S&P 500 index recorded its worst one-week performance since March 2023. The general market index fell more than 5% from a 52-week high. The recent rise in inflation reports raised concerns that the interest rate set by the Federal Reserve would remain high for longer than investors expected.
Wall Street technical analysts generally expect that the stock market will usher in a tactical rebound after the recent decline, especially as major technology companies release financial reports this week. But they are also worried that the recent pullback will continue.
JC O'Hara, chief market technical analyst at Roth MKM, pointed out that although there may be a rebound in the near future, the impact and deep oversold conditions have not spread to the extent that they have formed a real low.
The technical analyst said he expects the S&P 500 index to have a support level between 4,700 and 4,800 points, which is the point where buyers will reappear. The broad-market index fell about 3% to 5% from the level of 4967.23 points last Friday.
“History shows that we are nearing a tactical low, and the possibility of a rebound is increasing,” O'Hara continued. “This may not be the best 'low point' to buy, but we don't recommend selling at this time.”
Of course, some observers expect the stock market to rebound for a longer period of time, rather than just a short-term rebound. Tom Lee of Fundstrat expects the stock market to oversell, saying that all the stock market needs is a positive catalyst. I think as long as the inflation performance falls short of expectations, we are in a favorable position to rebound,” Lee said.
But other technicians have similar views to JC O'Hara. Oppenheimer's Ari Wald wrote that the stock market seemed “tactically attractive,” but added that the market now “needs to bottom out”. He anticipates that the S&P 500 may find support below 4,800 points and may not find a real bottom for weeks. He added that US Treasury yields must stop rising before the stock market starts rising again. However, unlike O'Hara, he expects investors to start buying on dips now.
Ari Wald wrote: “Although we think the S&P 500 may be within 2-4% of its corrected low, the final inflection point may take a few weeks.” “Looking ahead, we expect to be more optimistic as summer approaches.”
“For now, investors should take advantage of the stock market decline to balance recent expectations,” Wald added.
Meanwhile, BTIG's Jonathan Krinsky said he expects a rebound “early this week” as tactical indicators show that the market is oversold. But he expects the sell-off will take longer to end, when the S&P 500 index will fall back to 4,700 points. He pointed out that energy is a sector that has performed well.
“So far, the S&P 500 has had an intraday correction of -5.9%, which is exactly the same as the initial decline in August '23, followed by weeks of rebound,” Chriskey wrote. “Although we don't think things will be repeated from now on, it is worth noting that a similar eventual decline would drop the S&P 500 to around 4,700 points.”
edit/lambor