Markets sensed relief Tuesday after a string of brutal sessions, but stocks could tumble again before truly bottoming out, according to one strategist.
Major U.S. averages spiked Tuesday morning in the wake of a three-day drubbing in which the Dow Jones industrial average lost nearly 1,500 points. But based on some key indicators, whipsaw trading could persist before stocks touch their lows, said Nicholas Colas, chief market strategist at Convergex.
"Our indicators show that U.S. equity markets are still in for more volatility in the days ahead," Colas wrote in a note Tuesday.
He outlined conditions that eight metrics may have to meet before stocks find "a near-term bottom."
- Crude oil prices
U.S. benchmark WTI crude would need to avoid new lows for "at least a week," Colas contended. It plunged more than 5 percent Monday to settle at $38.24 a barrel.
"With a close at $38, oil is well below the $40 level we think divides market sentiment on a growing versus contracting global economy," Colas said.
The commodity rallied more than 3 percent in trading Tuesday, nearing $39.50 per barrel.