S&P 500 May Fall to 2010 Low After Stalling at 1,100: Technical Analysis

The Standard and Poor’s 500 Index’s failure to surpass a key level last week may mean the stock market will slump to a new low for the year, according to Strategas Research Partners.

The S&P 500 rose to 1,096.48 July 15, failing to maintain a rally past 1,100 for the third time in three months. After the past two failed rallies, the index retreated to successively deeper lows, the research firm said in a note July 20. The equity benchmark closed at a 2010 nadir of 1,022.58 on July 2.

Should the U.S. stock market extend its current decline, the S&P 500 may slide below that, Christopher Verrone, lead technical analyst at New York-based Strategas, said in an interview. The index has lost 12 percent of its value since hitting its April high, after dropping 1.3 percent yesterday to 1,069.59.

“Right now the hurdle is for the bulls to defend that 1,040 to 1,065 range,” Verrone said. “That will go a long way toward improving the near-term outlook.”

The lack of bullish sentiment in the market may be a good sign for the S&P and an indication stocks might rebound, Verrone said. Bearish sentiment among newsletter writers is at its highest level in 12 months, according to a survey by Investors Intelligence.

“From a contrarian perspective, that’s pretty supportive,” Verrone said.

Technical analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

To contact the reporter on this story: Caroline Dye in New York at cdye@bloomberg.net.

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