Bloomberg News

U.S. Stocks May Set New Low for 2012: Technical Analysis

June 28, 2012

The Standard & Poor’s 500 (SPX) Index was accompanied by other benchmark gauges when it slid to near its 2012 low on June 4, a sign the market may retreat further, according to JPMorgan Chase & Co.

Equity gauges from Germany to South Korea and Brazil also tumbled to or near their lowest levels of the year that day, as did other U.S. measures such as the Dow Jones Transportation Average and the Dow Jones Industrial Average. Major bottoms in benchmark equity indexes usually do not occur simultaneously, Michael Krauss, head of global technical research at JPMorgan Chase, wrote in a note to clients dated yesterday.

“More likely it was just the first step down, in a larger three-step decline from the April high,” Krauss wrote. “Expect huge divergences at major turns, like this year’s tops” which were “widely dispersed” between February and May, he said.

The S&P 500 slid as much as 11 percent from its four-year high on April 2 through June 4, when it sank as low as 1,266.74 intraday amid concern about Europe’s debt crisis and the weakest growth in American jobs in a year. The gauge then rebounded 5.1 percent through yesterday’s closing level.

Krauss said the index will probably continue its slump until it reaches 1,250 and may sink as low as 1,180 as the market mimics last year’s retreat, when the S&P 500 slid 19 percent from July 7 to Aug. 9. The levels he cited would mark a tumble of 6.1 percent or 11 percent, respectively, from yesterday’s close at 1,331.85.

Evidence of a bearish market is also supported by the 14- month low in the JPM EASI Index, Krauss wrote. That index measures the degree to which U.S. economic data is beating or trailing forecasts.

To contact the reporters on this story: Julia Leite in New York at jleite3@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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