Stocks won’t bottom until panic gets more extreme: BofA

Traders work after the closing bell at the New York Stock Exchange (NYSE) on August 12, 2019 at Wall Street in New York City.


New charts from Bank of America-Merrill Lynch’s Stephen Suttmeier suggest two things must happen before the stock market bottoms: The S&P 500 needs to fall another 5% and panic needs to get more extreme.

His first chart shows the S&P 500’s decline, and the key levels to watch.

“The correction is going to continue,” the firm’s chief equity technical strategist told CNBC’s “Futures Now ” on Thursday. “You take a measured move of this trading pattern — one leg down, one leg up. It’s gets you right down into that 2,750-2,740 range.”

Suttmeier estimates it’ll take weeks for stocks to find a floor, especially since the volatility is coming during the worst seasonal period of the year: August through October.

“We have plenty of resistance,” he said. “We continue to stall right around this 2,940 level on the S&P.”

Suttemeier’s second chart reflects fear in the market through the 25-day put/call ratio, which follows put volume relative to call volume. According to Suttmeier, panic isn’t widespread enough for stocks bottom.

“Once you get above one in the 25-day put/call ratio, you can see this S&P bottom. And, that happens probably sometime in September,” said Suttmeier. “We had fearful readings to start June. June was an up month, and we came into August very complacent.”

On Friday, the S&P 500 rallied 1.4% to close at 2,888.68 and is almost 5% away from its all-time high.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *