Bloomberg News

S&P 500 May Bottom in 2012, Bartels Says: Technical Analysis

December 07, 2011

Dec. 7 (Bloomberg) -- U.S. stocks are likely to form a “significant” bottom in 2012 before entering a new bull market, according to Bank of America Corp.

After a drop of as much as 18 percent, the Standard & Poor’s 500 Index might reach a low in the second quarter before climbing back to the upper part of its trading range near the 1,300 to 1,350 level by the end of 2012, Mary Ann Bartels, head of technical and market analysis at Bank of America’s Merrill Lynch unit, wrote in a note dated yesterday. A bull market is commonly defined as a 20 percent rally from the latest low.

Bartels cited the Decennial pattern, which examines the performance of every year within the decade. Years that ended in two, such as 1932, 1942, 1962, 1982 and 2002, featured market bottoms, she said.

“2012 could become the next year where a major market low is carved out to launch a new cyclical bull market,” wrote Bartels, who ranked third among analysts who study price charts in Institutional Investor’s 2010 survey.

The “base case” for years ending in two is an 18 percent correction from the prior year’s close, forming a low in May, Bartels said. The bottom is followed by a 34 percent rally through December on average, she said.

Debt-Crisis Concern

The S&P 500 has declined 8.5 percent since this year’s peak on April 29 as concern mounted that Europe’s sovereign-debt crisis will spread to the larger economies of Italy and Spain and that the U.S. recovery will stall. Futures on the benchmark gauge for U.S. equities fell 0.9 percent to 1,247.5 at 9:45 a.m. in New York today.

The S&P 500 will find support from 1,074 to 1,100, Bartels said, adding that she sees a 50 percent chance of the gauge breaking through those levels to reach 935 to 985. The index is likely to end 2012 in a range of 1,300 to 1,350, she said.

In a Nov. 21 report, Bartels wrote that declines in financial shares indicated the S&P 500 was at risk of sinking to this year’s intraday low of 1,074.77. The gauge has since advanced 4.6 percent after central banks took action to ease Europe’s debt crisis and American Thanksgiving retail sales set a record.

In technical analysis, investors and analysts study charts of trading patterns and price graphs to predict changes in a security, commodity, currency or index.

--Editor: Andrew Rummer

To contact the reporter on this story: Corinne Gretler in Zurich at cgretler1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net


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