Chart analysts expect that selling may resume after a short-term pullback. Stocks soared on Monday after President Donald Trump said he had “productive” talks with Iran and announced a temporary halt to attacks on Iranian power plants and infrastructure. The S&P 500 was last up 1.2%, but the strongest reaction came pre-market, with futures tracking the index up 4.1%. However, technical analysts expect this rally to be short-lived. The S&P 500 was already oversold after a fourth straight week of selling — meaning Monday’s rally was almost expected even without the latest news on the war — but a troubling breakdown in the long-term trend suggests more downside to come. “Three of our market insider stocks are oversold and could rebound this week,” Fairlead Strategies founder Katie Stockton said in a note Monday. “However, we do not intend to chase the rally, noting that the previous breakdown below the 200-day moving average increases downside risk in the coming weeks.” .SPX 1D Mountain S&P 500, 1 Day The S&P 500 fell below the 200-day moving average last week. This technical indicator averages the closing price of the underlying asset over 200 days and helps traders identify long-term trends. Piper Sandler’s Craig Johnson agreed. He said investors should view the pre-market movement as a “soft rebound” for now, and should focus on the key resistance levels: the 200-day moving average of 6,621 yen and the 20-day moving average of 6,770 yen. Ari Wald, head of technical analysis at Oppenheimer, said a short-term rebound could push the S&P 500 toward a ceiling of $6,900, about 6% above Friday’s close. He noted that Wall Street’s fear rating has not been able to soar above 35, as it did in early March, a sign that selling pressure is easing. But he expects the S&P 500 index could fall to 6,175 over the next six months, which he said is a more reasonable reset level on an interim basis and would correspond to a correction of about 12% in the S&P 500 index. Monday’s gains left the market-wide index down just 5% from its last high. “The S&P 500 is probably at or near its lows,” Wald told CNBC. “I don’t think it’s necessarily low.” At BTIG, Jonathan Krinsky argued that investors remain complacent. He said the S&P 500 index is “nowhere near washout” and that downside risks extend to $6,000. This is a 7% decline from Friday’s closing price of 6,506.48. Other major U.S. indicators were faring even more direly over the weekend. Russell 2000 was the first to fall and approached the correction area. A correction is a decline of more than 10% and less than 20% from a recent high. The Nasdaq Composite and the Dow Jones Industrial Average temporarily joined the small-cap index. On Friday, the stock fell more than 10% from its all-time high on an intraday basis, although it did not reach its closing price. On Monday, they came back from that level.
