Analysis-US stock market technicals suggest possible rebound as earnings, CPI loom

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Analysis-US stock market technicals suggest possible rebound as earnings, CPI loom

© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange in New York City, U.S., September 26, 2023. REUTERS/Brendan McDermid/File PhotoNEW YORK - Technical and seasonal indicators that investors use to gauge the U.S. stock market's health show it may be time to buy, though upcoming inflation data and the third-quarter earnings season could still throw Wall Street a curveball.

"The preponderance of evidence supports the case for a year end rally," said Ed Clissold, chief U.S. strategist at Ned Davis Research. However, he said,"it remains to be seen if the market has begun a multi-month topping process." One positive sign is that the S&P 500 has remained above the closely watched 200-day moving average, a trend line that can act as support. The S&P 500 was last about 3.5% above its 200-day moving average.), pointed out that the index remained above the 200-day moving average while more than one-fifth of the index's stocks were in an oversold status, in which relative strength readings indicate a positive price correction could be coming.

In the 14 instances when the S&P 500 has gained at least 10% through July and then declined in August, as it did this year, the index has increased every time over the last four months of the year, according to Ned Davis Research. The average gain in those instances has been 10%. Yet the picture is not as clear cut as last year, when a brutal market selloff saw stocks fall to a nearly two-year low in mid-October. That was followed by a 28% rally in the S&P 500 through late July of this year.

 

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