S&P 500, when to return to buying?S&P 500SP:SPXSwissquoteSince the peak at the end of last January, the drawdown of the S&P 500 index has reached 10%, a bearish reality that has become more concrete since the beginning of the military operations against Iran carried out by the United States and Israel. Risk assets in the stock market are under pressure from the sharp rise in the price of oil and natural gas in the markets and from the new expectations that result from this in terms of inflation outlook and monetary policy. But like all stock market sell-offs of the past, this correction will have an end, but there are several conditions to be met before considering returning to buying. First of all, there are mandatory fundamental conditions: • Reopening of the Strait of Hormuz • Resumption of the normal functioning of the oil and gas industry around the Persian Gulf and therefore resumption of energy supply to Asia • Return of the oil price below $80 for WTI, return under control of inflation expectations and above all a forward-looking monetary policy that does not move towards a more restrictive trajectory From a technical standpoint, the first signal to observe before calmly returning to buying is therefore to see the price of US crude oil move back below the $80 threshold. The technical analysis of the S&P 500 index allows us to clearly understand how past sell-offs have ended. Several technical conditions must be met: • Return to proximity of a major support level • Being oversold in terms of momentum indicators (RSI and LMACD are used here) • Observing oversold conditions from a quantitative analysis perspective, with for example the number of S&P 500 stocks above their 50-day moving average • In terms of institutional positioning, a return of the percentage of cash held by managers to a level above 5/6% The chart below is taken from the monthly study (on the 15th of each month) “BofA Global Fund Manager Survey” and reveals the evolution of the average percentage of cash held by institutional managers. Historically, the 5/6% zone is the zone where bear market bottoms are formed. On the contrary, below 4%, the market may be close to a medium-term top. The chart below shows the percentage of S&P 500 stocks above the 50-day moving average. This is a quantitative approach to the market and generally the market is close to its low when there are fewer than 20% of stocks above their 50-day moving average. For the S&P 500 index, the most obvious technical support to return to buying is located between 6000 and 6200 points, which is the horizontal support level corresponding to the former all-time high. The chart below shows the Japanese candlesticks in daily data of the Dow Jones index. DISCLAIMER: This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. 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