Ari Wald, Technical Analyst at Oppenheimer, thinks investor anxiety in October will be replaced with the realization that it’s still too early for recessionary concerns.
Wald says the S&P 500 is finding selling pressure at 2,755 which comes from gap resistance just below the 200-day moving average (see Chart 1). If the index rallies above this level, he thinks it will head towards 2,900-2,950 in the medium-term, which would be the upper end of a developing range. In the meantime, Wald says it will be important for the S&P to hold above last week’s gap at 2,685, which is now acting as support.
As further evidence for an upwards move, Wald points to the Put/Call ratio (Chart 2). The composite Put/Call ratio (10-day average) is coming off its most pessimistic level since the US presidential election in November 2016 and offers contrarian fuel for a bounce “as previous bulls turned bears scramble to get back on-side”.