The S&P 500 closed above 4,231 points on Friday (12th), signaling a bear market bottoming, which made the US stock market bulls cheer.
The S&P rose 1.73% to 4,280.15 points on Friday and closed above 4,231 points, rebounding after falling more than 20% from the all-time high (4796.56 points) set on January 3, recovering half of the losses in this bear market.
From a technical analysis standpoint, based on 13 bearish moves since World War II, once the S&P recovered half of its bear market losses, it has never made another new low since.
Sam Stovall, chief investment strategist at CFRA Research, pointed out that the S&P closed above 4,231 on Friday, suggesting that “the bottom of the bear market is established”, and even if the previous lows are retested, they should not make new lows.
Why are many analysts concerned about a 50% pullback? This is a technical analysis strategy based on the Fibonacci retracement.
The golden section line is ubiquitous in nature. The golden section number is 1, 1, 2, 3, 5, 8, 13, 21, 34, etc. Each number in this number sequence is equal to the sum of the two preceding numbers, and The ratio of the former number to the latter number approaches a fixed constant of 0.618, so 61.8% is called the “Golden Ratio”. Because it is ubiquitous in everything in nature, such as shells, ocean waves, human body proportions and even the risky assets of Wall Street.
Technical analysts believe that, based on the analysis of the golden section line, after a round of decline, the resistance levels of the stock market rebound at 38.2%, 50% and 61.8% are the most critical support levels of the callback line, and 23.6% and 76.4% are regarded as secondary To support.
Jonathan Krinsky, a market technical analyst at BTIG, said that since 1950, there has not been a bear market rally of more than 50% pullback to a new low, but although the S&P closed above 4,231, the stock market still has the potential to be choppy , he remains cautious about the stock market outlook.