Investors looking for a quick end to the stock sell off could be disappointed and may have several more months of volatile trading to go before the market hits rock bottom, technical analysts say.
Investors looking for a quick end to t he stock sell off could be disappointed and may have several more months of volatile trading to go before the market hits rock bottom, technical analysts say.
That time frame coincides with the run up to major events that strategists say could be fundamental catalysts for the market. One is the March 1 deadline in the trade talks between the U. S. and China, and any resolution of trade issues could be a positive. The other is the Federal Reserve’s March 20 meeting where the Fed is expected to consider raising interest rates, but the market is betting the Fed instead could pause, a positive for stocks.
The stock market’s wild swings this week, including the more than 1,000-point surge Wednesday in the Dow followed by Thursday’s sharp declines, are signaling the market could be hunting for its lows. Technicians are debating whether the end is near but agree there could be other sharp swings higher and rallies before the market bottoms out.
« If you look at major bottoms through history, they all required some double bottom. We don’t’ have that yet. It’s still kind of the first leg of the ‘W,' » said Ari Wald, Oppenheimer technical analyst. « Usually you need some price consolidation. We’ve been watching 2,375 [on the S&P 500]. We went below it temporarily on Monday, then went back above it. It’s the 50 percent retracement of the bull market since 2016. »
Wald said the absolute bottom could be weeks or even months away, and the market now appears to be making a high-intensity low.
« Just how stretched we are to the downside, you can see with these big moves to the upside. It’s too late to become bearish, and it’s too early to become bullish, » he said.
The S&P 500 was down about 1.8 percent Thursday to about 2,423 in afternoon trading, after an extremely volatile week. It ended the half day Monday session, down 2.7 percent t 2,351 before snapping back to 2,470 Wednesday.
While there is no way to predict the duration of the market downturn, positive developments on trade or signals that the Fed could slow down its interest rate hikes could help stabilize the market.
