By Senad Karaahmetovic
A Bank of America equity strategist says the recent move higher in equities appears to be “a typical bear market rally.”
She reiterated the bank’s stance that we are yet to witness the real bottom.
“Our bull market signposts continue to show no real signs of a bottom, with just 30% being triggered (40% if unemployment rose in Aug.), vs. 80%+ triggered in prior bottoms,” she said in a client note.
The strategist reminds clients that September has seasonally been a weak month. Another poor performance in September would push the S&P 500 towards BofA’s year-end target of 3600.
The bank’s technical research strategist, focused on technical analysis, sees the next support levels for the S&P 500 at 3810 and low 3700s in case 3900 doesn’t hold.
“Investors know that September is weakest month of the year for US equities. Going back to 1928, the SPX is up only 45% of the time with an average return of -1.07% in September. However, with this pain often comes opportunity for the bulls,” the research strategist wrote in a separate note to clients.
Although we may witness another selloff soon, the strategist sees chances for a yearend rally given that seasonality shows markets tend to rally between November and January.