After an approximate 9% fall from its September peak, Ari Wald, Technical Analyst at Oppenheimer, says the S&P will need to rally back above last week’s gap (below 2685) as the first step towards recovery.
In the mean time, he will be looking for signs of a ‘less intense’ test of the October low at 2,600. These include:
1) A lower high in the VIX
2) A higher low in 14-day RSI and
3) Fewer Russell 3000 stocks falling to a 52-week low
Overall, however, he thinks the S&P 500’s breach of its bull market suggests it is reversing sideways and he favours exposure to high quality, large-caps at this late stage of the bull cycle.