The stock market came in terribly close to ending Friday in a bear market, surpassing at least 20% in early January. Many investors want to see it get there so that Wall Street can set it aside and start moving higher.
Mark Newton, head of technical strategy at Fundstrat, does not necessarily think that we will get the so-called surrender, at which time investors will sell massively because they have stopped recovering their losses.
In fact, Newton thinks the late-day reversal of the stock market on Friday gives hope for a small bounce.
“While I dislike calling the big counter-trend in the downtrend, the market has probably exhausted itself in the near term and may rally towards the end of May,” Newton said in a research note.
Target at 4,020-4,030, above resistance 4,100.
The S&P 500 rose 0.01% to close at 3,901 on Friday. It dropped to 3,810. The S&P 500 needs to close below 3,837 for the bear market to officially enter. The index has been declining for seven consecutive weeks.
Newton says that when financial media began to use the term beer market widely, “many of us realize that in terms of the broader market, it was a bear market for some time, in terms of the level of technological damage seen by many problems.”
Strategists point out how the technology sector has begun to “outperform” the S&P 500, and the healthcare sector is looking attractive. Newton said the “relative breakout of equal-weight healthcare vs. SPX” is a cause for optimism.
“This suggests that healthcare should work well in June / July,” Newton said. “In terms of percentages, healthcare is such a big part of SPX that it’s a tailwind because of this energy.”
Newton said his favorite technical names in space are the big pharma companies
He likes biotech
“Healthcare is approaching a seasonal bullish period, I like to buy / own all these names,” Newton said.
Write to Joe Welfel at [email protected]