Stocks Look for Bottom After Severe Decline

The S&P 500 index is severely oversold after the massive decline in late February. Additionally, the latest intermediate-term low will likely form sometime during the next 3 weeks, if it has not already occurred during the week ending February 28.

A quick rebound followed by a move up to new highs would reconfirm the current bullish trend and favor additional intermediate-term strength. Alternatively, an extended decline phase that moves well below the last intermediate-term cycle low (ITCL) at 2,855 would signal the likely transition to a bearish trend.

S&P 500 Index Weekly Chart Analyses

The following technical and cycle analyses provide intermediate-term forecasts for the S&P 500 index. For short-term outlooks, see the latest short-term forecast.

Technical Analysis

The index closed slightly higher this week, holding near recent short-term lows and continuing a test of congestion support in the 2,950 area. Technical indicators are neutral to slightly bearish overall, suggesting that direction is in question with a slight downward bias.

Cycle Analysis

We are 3 weeks into the decline phase of the cycle following the intermediate-term cycle low (ITCL) that occurred during the week ending October 11. A quick rebound followed by a move up to new highs would reconfirm the current bullish translation and favor additional intermediate-term strength. Alternatively, an extended decline phase that moves well below the last ITCL at 2,855 would signal the likely transition to a bearish translation. The window during which the next ITCL is likely to occur is now through March 27.

• Last ITCL: October 11, 2019
• Cycle Duration: 21 weeks
• Cycle Translation: Bullish
• Next ITCL Window: Now through March 27.

• Setup Status: No active setups.
• Trigger Status: No pending triggers.
• Signal Status: No active signals.
• Stop Level: None active.

Intermediate-term Outlook

• Bullish Scenario: A rebound and weekly close above the previous high at 3,380 would reconfirm the uptrend from December and forecast additional gains.
• Bearish Scenario: A weekly close well below congestion support in the 2,950 area would reconfirm the downtrend from late February and predict additional losses.

Both scenarios are equally likely.

Category: Commentary, Market Update