Bloomberg News

‘Selling Climax’ May Take S&P 500 to 1,200: Technical Analysis

June 05, 2012

The Standard & Poor’s 500 Index (SPX) may extend its decline from its April peak to 15 percent in a “selling climax” that would deplete bears, according to StockCharts.com Inc.

The benchmark index for U.S. equities dropped 9.9 percent to 1,278.18 through yesterday from its 2012 high on April 2 as concern grew that global economic growth is slowing and Europe’s debt crisis is worsening. While the gauge will likely be supported at 1,250, further selling may push it as low as 1,200, a level where the S&P 500 would retrace 61.8 percent its advance since October, said Arthur Hill, a technical analyst at Redmond, Washington-based StockCharts.com.

“Economic reports have been largely below expectations the last two months and the stock market is pricing in this information,” Hill wrote in a note yesterday. While the S&P 500 will probably find support at 1,250, “we could even see an overshoot because some sort of selling climax is possible before all selling is exhausted,” he said.

The S&P 500 slumped 6.3 percent in May, the most since September, amid concern Greece would exit the euro area and as data on U.S. jobs and manufacturing missed forecasts. The index on June 1 dropped below its 200-day average for the first time since December after a Labor Department report showed the economy added the fewest jobs in a year.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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