The stock market’s losing streak so far has been noteworthy for its duration, but not its intensity. The S&P 500 has fallen for seven of the past 10 trading days (including Tuesday’s modest gain in midday trading), leading to a natural conclusion that there’s a budding trend here. But the damage is slight, with the benchmark index down all of 4.6 per cent so far.
For sure, there have been far greater setbacks for the index since stocks began to recover in March 2009. Between last June and October, for example, the index slumped 18.9 per cent. And in 2010, it fell 16 per cent between April and July.
Mary Ann Bartels, head of U.S. technical analysis, has studied the charts and remains convinced that a minor correction is in the works – and the most likely scenario as she sees it is that the S&P 500 will give back one-third to one-half of the gains it won since it began to rally from its recent October low. Those gains were 32 per cent, which means that a correction could put the index back in a range between 1,300 and 1,250.
Right now the index is sitting at 1,343, implying it has another 3 per cent to 7 per cent decline ahead of it.
The interesting aspect to Ms. Bartel’s forecast, though, is that she sees the current turbulence as little more than a setup for better times ahead. As she says in a note on Tuesday: “We still expect a summer rally once this correction is completed.”