NEW YORK: A bounce could be the cards for US stocks next week as bulls defend a key technical level and managers buy the quarter's winners to prop up their books.
But gains coming from healthcare, staples or other defensive sectors that have outperformed the market in the last several months would only support the notion that the US stock market needs to complete its correction phase and panic selling must occur before a more sustained comeback develops.
"We want to see more fear," said Ari Wald, equity strategist at Brown Brothers Harriman in New York.
But be careful what you wish for. The sources of the recent decline, including Greece's slow march toward a default on its debt, weak US economic data and the creeping deadline to lift the US debt ceiling, are far from being resolved.
HOLDING THE 200-DAY SHOWS THE WAY
Despite a drop that dragged the S&P 500 as much as 8.2 per cent below its three-year high hit in early May, the index held above its 200-day moving average -- a major line in the sand as the bulls and bears battle for control of the market.
The slide had been telegraphed for weeks and the market's by-the-book performance -- pulling back to a widely followed level -- seems too well choreographed for some analysts.
"The fact that we went to the 200-day ... seems just a little too perfect," said Marc Pado, US market strategist at Cantor Fitzgerald & Co in San Francisco.
He said the timing of the move was supportive, as the market creates a technical base before resuming its upward move on the back of strong earnings.
"You might get an attempt at a shakeout move," Pado said. "But sometimes the majority is right."
source-economic times
steven
management trainee-fundamental analysis
DENIP consultants Pvt Ltd
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