SP500 Drops to 15-Mth Lows Amid Heavy Sell-off
13 June 2022
Traders sold everything on Monday - stocks cratered, bonds were offered sharply, sending yields to new cycle highs, cryptocurrencies got hammered, and the USD advanced strongly, sending every major USD pair lower.
At the time of writing, the SP500 index dropped to 3,800 USD, the level last seen in March 2021.
Big banks remain bearish
Stephen Suttmeier, a technical research strategist at Bank of America, commented on the SP500's technicals after the index fell nearly 3% on Monday.
"The inability to clear first resistances and the lack of bullish follow-through signals from the indicators increase the risk for lower lows toward the next supports at 3500 (50% of the March 2020-January 2022 rally and rising 200-week MA) on the SPX," he told clients in a note.
In a recession, though, Goldman Sachs' David Kostin sees the SP500 falling all the way to 3150 USD.
"If by year-end consensus 2023 EPS estimates move halfway towards our top-down forecast of $239 and the P/E multiple remains constant at 17x, the implied index level would be 4165. In a recession, if the EPS estimate moves halfway to $200, a 14x P/E would bring the S&P 500 to 3150," Kostin wrote in a note.
As long as the index trades below the major support of 3,850USD, the long-term trend seems bearish, along with both the medium and short-term outlooks.
The next target could be at March 2021 lows in the 3,725 USD region.
On the other hand, the SP500 must rise above 3,850 USD to cancel the immediate selling pressure. However, this looks improbable as of now as the bearish momentum remains solid.