Tags: Stovall | stocks | bounce | pullback

S&P’s Stovall: Stock Market ‘Ready for Bounce’

By Dan Weil   |   Wednesday, 23 May 2012 07:41 AM

Various factors indicate that stocks are “ready for a bounce” and that declines will be contained, says Sam Stovall, chief equity strategist at S&P Capital IQ.

First, there has been the rally in Treasurys, sending 10-year yields to near record lows.

“People are looking for safety in cash or secure [government bonds], which indicates the risk is very high,” Stovall tells Yahoo.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

But the stock market is still in pullback mode — a decline of 5 to 10 percent.

“Usually we have to wait until a bear market [20 percent drop] before we get such a washout,” Stovall says.

“So we are ready for some sort of bounce.” The Standard & Poor’s 500 Index has slid 7 percent from its April high.

“The lack of speed with which we crossed the 5 percent threshold is intriguing,” Stovall says. Normally it takes 19 calendar days for such a decline, he says. But this time it took 42 days.

Of all the times it took 42 days or more in the past, only one pullback turned into a correction – a market decline of 10 to 20 percent, he says.

So if history’s any guide, there’s a good chance we won’t go beyond a pullback.

The stock market appears to be in the midst of the bounce Stovall forecasts, rising Monday and most of Tuesday before the Dow closed a bit lower.

“We’re getting some refocus back on [positive] economic news,” Michael Strauss, chief investment strategist at Commonfund, tells Bloomberg.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

© 2015 Newsmax Finance. All rights reserved.

1Like our page

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved