The ongoing rally in the S&P 500 could send the index 40 percent higher, but it would only be a correction in an overall downtrend, technical analysts told CNBC.
“It’s the best rally in the bear market since the thing began over a year ago and it’s not over yet,” Robin Griffiths, technical strategist from Cazenove Capital, said. “There’s every reason to expect this rally to be at least 25 percent and possibly up to 40 percent.”
The predicted rise of 40 percent would be counted from the lows of March 6, which saw the S&P close at 666 points. The index has already rallied around 20 percent since then, so it could be due for another 20 percent, according to Griffiths’ forecast.
As long as the S&P can hold above the 770-to-775 point range, the trend points to more gains in the short-term, Locke added. The rally could send the index up toward 950 points, Chris Locke, managing director at Oystertrade.com Management, told CNBC.
The S&P has moved back above a critical level of 804 points, where the index was at risk of another decline, Locke added.
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A rally to 950 points on the S&P would mark a rise of 15 percent from Tuesday’s closing price.
However, both Locke and Griffiths agreed that the rally was only a correction within the overall bear market.
“It’s a pattern of falling highs and lows, below a falling 200-day moving average - that’s the definition of a bear market,” Griffiths said.
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