Stock market buyers stepped in again on Wednesday as the S&P 500 approached bear market territory.
The S&P 500 was up 0.2% in late morning trading, while the Dow was up 35 points, or 0.1%. The Nasdaq Composite was up 0.8%.
The S&P this week has repeatedly avoided closing in bear market territory after falling below the 4915.32 level that would represent a 20% decline from its Feb. 19 high.
Frank Cappelleri, founder of technical analysis firm CappThesis, told Barron’s that it’s very important that there have been signs of buyers this week. He notes such buyers began to emerge when the S&P neared 4800, which lines up with the index’s 2021 highs and a 50% retracement level of the 2022 to 2025 rally. He describes such levels lining up as a “confluence of support” which may carry more weight than a single technical level.
“At the very least, this suggests that we’re transitioning back into a two-way market—rather than the one-way selling we just experienced,” Cappelleri says. “Don’t forget, the market dropped more than 20% in a very short period. The only recent comparison we have for that kind of speed is COVID, and obviously the circumstances now are very different.”
He says we still need to see a bounce that lasts more than a few hours with some actual follow through to gain some more confidence.
“From there, the next key step is forming a higher low,” he writes. “That’s what marks the early stages of a potential bullish reversal pattern. At this stage, it’s really about stopping the bleeding and then seeing if the market can build a new foundation from there.”
