Bank of America technical analyst Stephen Suttmeier has suggested that investors should start buying equities as the market dips in May and wait for the bullish trends to set in during the course of the summer.
In his analysis, he compared the three-month VIX with the broader volatility index. This is nothing but a comparison between the three-month volatility index with the speculated 30-day volatility index. The ratio calculated with this method peaked below 1.25, which indicates that markets will go down.
Stephen Sluttmeier pointed out this pattern and said, “Peaks in this indicator below the overbought threshold of 1.25 spelled trouble for the S&P 500 (SPX) in March, August and December 2022.” He compared patterns observed recently, noting that a similar pattern in April leads to a weaker market in May, which is followed by a summer of high stock prices.
This analysis also finds support in the Dow theory. According to this theory, if one segment of the Dow Jones Industrial Average surpasses its previous high, it leads to a market renewal.
Suttmeier speculated that S&P 500 could gain 5% in the summer. According to his estimates, the benchmark index will rise above its previous highs of 4195 to 4325.
The predictions made by Suttmeier are in contradiction to those made by other big banks. They expect the market to slow down as a ‘mild’ recession hits the US economy. JPMorgan went as far as to speculate a 15% drop in stock prices. Renowned investors like Jeremy Graham are worried that stocks could drop in value by 50 percent.
