S&P 500's Latest Dip May Approach 10%: Technical Analysis

The Standard & Poor’s 500 Index (SPX) may be in the midst of a slide of almost 10 percent, Oppenheimer & Co. said, citing the average size of previous market dips since the current bull market began.

The benchmark gauge has staged retreats of 4 percent or more on 11 occasions since March 2009, for an average decline of 9.7 percent, according to data compiled by Oppenheimer. The S&P 500 fell 4.6 percent on an intraday basis in the five days of trading following April 2, when the current decline started. The slumps typically last three to four weeks, the data show.

Carter Worth, New York-based chief market technician at Oppenheimer, said the S&P 500 may approach 1,340. That would erase almost a quarter of the index’s 320-point gain from its October low through early April. The index reached its 2012 high of 1,419.04 on April 2 and closed at 1,385.14 yesterday after rebounding from a trend line drawn from the intraday low of Oct. 4.

“We’re on the mattress and we’ve sunk to support,” Worth said in a telephone interview. “I think we’ll sink further.”

Equity gains stalled this month after the S&P 500 jumped 12 percent in the biggest first-quarter rally since 1998. The benchmark index had its first back-to-back weekly decline since November last week as U.S. jobs data missed economists’ forecasts and concern about Europe’s debt crisis and slowing global economic growth.

The falling trend in the market has offset the effects of better-that-forecast earnings at companies with larger market values, Worth said. Intel Corp. (INTC) and JPMorgan Chase & Co. (JPM) fell 1.8 and 3.6 percent, respectively, on the trading days immediately after the release of earnings that exceeded average analyst estimates.

“Things are tired,” Worth said. “These companies have been priced in a lot. The market, having advanced so deeply, has discounted the news that is now coming.”

The two biggest declines since the start of the current bull market have occured during the second and third quarters. The S&P 500 declined 17 percent over a nine-week period from April 2010 to July 2010. The benchmark also plunged 21 percent during a 12-week span from July 2011 to October 2011.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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