Stocks’ summer rally could mean the worst of the bear market is over, but even so, chart strategists say another big pullback could come. could happen in September. In fact, some strategists say that from a technical point of view, the market may have begun to enter a new bull cycle. Others disagree, saying they need more confirmation from other signals. But all note that the historic September was negative for the market – and it could happen again. Tracking the 50-day moving average, Ed Clissold, chief US strategist at Ned Davis Research, said he sees technical signs that stocks may have entered a bull market, but he warned that fundamentals could skew the market’s bullish view. His work shows that by the time 90% of common stocks are above their 50-day moving average, the market is already in an average bull cycle of 1.8 months. It’s been two months since the mid-June low. He noted that as of Monday, about 89% of common stocks were above the intermediate moving average, but that number was more than 90% for S&P 500 stocks. The 50-day moving average is simply average price of the last 50 closing prices for a stock or index. A close above it will be a positive momentum signal. “One way to think about it is that if this is a bull market that you know only in hindsight, this is how it will play out and the technicals almost always tell you what to do,” says Clissold. know the fundamentals and macros in advance,” says Clissold. “I don’t dismiss macro concerns about the Fed tightening cycle or slowing earnings. Those are real concerns.” Analytical view on equities Stocks have been buoyed by positive momentum since setting lows in June. Strategists now say that it looks like the bear market is at a technical low. The S&P 500 index was higher for four straight weeks, and the broad market index ended Monday about 18 percent higher than its June low. The market has made positive progress during the rally. First, the S&P 500 index closed Friday above 4,231, the 50% retracement or midpoint between its top and bottom. BTIG says that historically means the index should not be setting new lows in the current cycle. Strategists say it’s just a signal, and it doesn’t indicate a bull market has begun. “You are still below the sloping 200-day moving average,” said Todd Sohn, technical analyst at Strategas. “The broader trends don’t change much once you’ve received these positive momentum signals. It’s really great short-term momentum and a favorable signal for the next 12 months, but tactically. , I would question the amount of gas in the tank.” He said a bearish move could bring the S&P 500 down to around 4,000 in the September period. ‘Borderline between bullish and bearish’ Next big hurdle for stocks could be the 200-day moving average on the S&P 500 – which stood at 4,327 on Monday. “That could be a day not far away,” Sohn said. The S&P 500 index ended Monday at 4,297.14. “The 200-day moving average, for us, has always been the boundary between bullish and bearish, very simple in a popular and common sense,” said Ari Wald, head of technical analysis at Oppenheimer. used to consider these moves”. Wald said that level will be key for the S&P 500 to break through, but he’s also watching the 200-day level across individual stocks for bullish market signals. “The final signal won’t come until 70% of stocks are over their 200 days,” he said. As of Monday, that number for the New York Stock Exchange universe he follows is 38%. “The emotional pendulum has come from extremes. I still think a lot of those bears have to surrender,” Wald said. He expects the stock to see a decline between September and early October, before recovering in the fourth quarter. That would follow the pattern of midterm election years, where the market is typically higher in the last quarter of the year. “Just because the market is able to recover in September doesn’t mean it isn’t a bull market,” said Ned Davis Research’s Clissold. He said short-term sentiment indicators are showing more optimism for investors. “There’s some optimism creeping back into the market,” added Clissold. “A pullback that could dampen some of the optimism could be good for the medium term.” Strategas’ Sohn said stocks that have rallied recently can be especially vulnerable even now. “I think it makes sense to omit some of the negative connotations, cryptocurrencies, and unprofitable technology names. I wouldn’t want to overstate your welcome as they already exist. a good response,” he said. Sohn pointed to a big move higher at names like DraftKings, which started in July at around $12 a share and closed Monday at $20.80. The Ark Innovation ETF, a poster child for high growth, is up about 30% since the start of July, but it’s still down nearly 45% for the year. “These are summer rentals,” he said. “Time to move out.”