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S&P 500’s New Low Signals ‘Bleaker’ Outlook: Technical Analysis

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June 8 (Bloomberg) -- The Standard & Poor’s 500 Index may extend its decline another 11 percent after breaking its February low, according to Execution Noble LLC.

The benchmark for U.S. equities yesterday completed its biggest two-day drop in 14 months, closing at a 2010 low. That suggests the biggest retreat since the bull market began may not be over, said Rick Bensignor, Execution Noble’s New York-based chief market strategist. The decline put the index at 5 percent below its 200-day average for the first time since January 2008, a sign the market’s retreat is gaining momentum, according to Jack A. Ablin, chief investment officer at Harris Private Bank.

“Things will get bleaker,” Bensignor, who has studied charts of trading patterns and prices to predict market moves since 1979, wrote in a note. “Our best guess is that the bulk of whatever buyers are around now are likely value investors doing some selected picking, but that the trend is down.” He predicts the index could fall to around 950.

The S&P 500 has slumped 13 percent since its 2010 high on April 23 on concern the sovereign debt crisis in Europe will hinder global economic growth. The index last week rose for two consecutive days for the first time since April, then plunged 3.4 percent on June 4, after the U.S. Labor Department report showed lower employment growth than economists estimated.

Philip J. Roth, chief technical market analyst at Miller Tabak & Co., said that while the S&P 500 managed to hold above its May 25 intraday low of 1,040.78, investors “should be prepared for another down leg.”

“The medium term trend is on the brink of turning down,” he said. “The onus is clearly on the bulls to avoid a breakdown.”

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net.

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

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