Stocks are poised for a short-term rebound, but technical analysts looking at price charts warn that the correction is far from over. Stocks edged higher on Monday as they tried to recover or at least stabilize after last week’s losses, while the S&P 500 posted its worst week since March 2023. After the recent run, the broad market index is down more than 5% from its 52-week high. The inflation report raised concerns that interest rates set by the Federal Reserve will remain higher than investors expected. Chart watchers on Wall Street had widely expected a strategic rebound in stocks after recent losses, especially in a bumper earnings week for the biggest tech companies. But they are also wary of further consolidation. JC O’Hara, chief market technician at Roth MKM, wrote on Sunday: “While a near-term rebound is possible, breakouts and deeply oversold conditions have not yet extended to the point where we are certain a true low will occur. “The technician said he expects support targets for S&P 500 stocks – the point at which buyers will re-emerge – between 4,700 and 4,800. This is about 3% to 5% lower than Friday’s market index’s closing price of 4967.23 points. “History shows that we are in a strategic downtrend and a reversal is increasingly likely, “This may not be the best ‘low’ to buy, but we would not recommend selling at this time.” For the YTD Mountain S&P 500 to be confirmed, some observers are expecting a more sustained rally than just a rebound in the stock market. Fundstrat’s Tom Lee expects stocks to sell higher and says all stocks need to be more of a positive catalyst. “I think as long as inflation is better than expected, we’re in a good position to rebound,” Lee said Monday on CNBC’s “Squawk Box,” but other technologists shared a similar view to O’Hara. On Saturday, Oppenheimer’s Ari Walder wrote that the stocks looked “strategically attractive,” but added that the market now “needs to form a bottom.” He predicts the S&P 500 may find support below 4,800 and may not find a true bottom for the week. He added that U.S. Treasury yields must stop rising before stocks start rising again. However, unlike O’Hara, he expects investors to start buying the dip now. “While we believe the S&P correction could be between 2-4% lower, a final turning point may still be several weeks away,” Wald wrote. “Looking ahead, we expect to become increasingly optimistic as we have shown that the first term Election years are typically strongest between June and August “For now, investors should take advantage of this downturn,” Wald added, and keep near-term expectations balanced. He expects a rebound to materialize “early in the week” as strategic indicators point to oversold conditions. But he expects the selloff to take longer to finish, with the S&P 500 returning to 4,700. He noted that energy is an outperforming industry. “So far, the S&P 500’s intraday correction is similar to the initial decline before the multi-week rally on Aug. 23,” Klinsky wrote. will take to -The October correction lasted three months (in 2023), and we are less than a month away from it.” Elsewhere, Wolfe’s Rob King. Sberg expects the market to continue to rotate, most notably the increase that brings value.
