The Standard & Poor’s 500 Index must rally another 8 percent to overcome signals that U.S. stocks are already in the grip of a bear market, according to a technical analyst at MTS Research Ltd.
Price changes in the next few weeks will determine whether the decline in the index’s value from early April to early June was a three-wave correction in an uptrend or the first three of a five-wave downtrend, Peter Beuttell, an MTS analyst in Bath, England, said.
“The S&P is in the end game,” said Beuttell. “A break of recent lows would turn the pattern bearish. Apart from the U.S. and markets like Mexico, all major markets are in bear markets.”
The index must break through the 1,435 level, the level at which the 2011-to-2012 rally would be longer than the 2010-to-2011 rally, he said in an interview.
The benchmark gauge lost 11 percent between April 2 and June 4 before rallying 3.7 percent last week, its biggest weekly gain this year.
“I’m hoping the next month or two will make it clear if we will negate the bear market scenario,” Beuttell said. “I think the rally pattern is incomplete.”
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.