Some closely watched technical measures portend hope for stock prices — at least in the short term. Technical analysis looks at price...
Some closely watched technical measures portend hope for stock prices — at least in the short term.
Technical analysis looks at price movements and volume rather than fundamental factors like job numbers or earnings. The goal is to identify patterns that may signal future movements.
One popular indicator, “relative strength,” has been trending positive, says Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. He’s been comparing the small-stock Russell 2000 and the technology-heavy Nasdaq composite to the large-cap Standard & Poor’s 500.
Most Read Business Stories
- The penthouse atop Smith Tower is on the rental market for the first time
- Downtowns will be back, but Seattle has choices to make
- US advisers endorse single-shot COVID-19 vaccine from J&J
- Zillow’s price estimates are now cash offers in homebuying push
- Seattle rents tick back up after months of free fall
“When you’re in a rough market like we are now, you want to see tech and small caps lead, and that’s what we’ve been seeing,” Detrick says. When investors lose confidence there’s a “flight to quality” toward big cap stocks, he says. Now we’re seeing that reverse — a bullish sign.
Another tool plots standard deviation, a measure of volatility and moving averages of stock or index values to determine “overbought” and “oversold” conditions. Moving averages show the average value of a security price over a specific time period. Most S&P 500 sectors are at, or very near, oversold conditions, a signal it may be time to buy.
Justin Walters, co-founder of Bespoke Investment Research, is bullish based on oversold conditions and “expects a bounce of around 10 percent over the next 30 days.” But, he doesn’t believe the bear market is over.
The S&P 500 could fall 28 percent from its high, he says, which would put it in line with past bear markets. On July 15, the index fell 23 percent below its October peak.