By Senad Karaahmetovic
Stephen Suttmeier, Bank of America technical strategist, has reflected on the technical aspect of the S&P 500 after the index bounced off support in the low 3900s.
Last week, Suttmeier warned that the S&P 500 may drop to the low 3900s to complete the head and shoulders pattern. He now notes that “tactical sentiment from the 5-day put/call and 3-month VIX vs VIX suggests angst and not capitulation.”
Moreover, historically poor performance in September could mean that 3900 won’t hold again, with the bears eyeing a move to 3810 in that case.
“The late June into mid July lows offer the next support at 3738-3712, but a break below the 61.8% retracement at 3899.84 would increase the risk for a full retracement back to the June YTD low at 3636. The tactical pattern on the SPX remains weak below 4015-4043, which is nearby chart resistance and the 50-day and 100-day moving averages (MAs). Above 4015-4043 is needed to suggest a stronger tactical rally,” Suttmeier further explained in a client note.
However, the technical strategist also notes that some SPX stocks are in the “deeply oversold” territory, hence further downside may be limited from that point of view.