Bank of America expects short-term pullback in S&P 500 with upward tendency preserved

According to the Bank of America specialists, the US stock market is showing signs of a probable decline in the near future. As the experts believe, it will create an opportunity to purchase the S&P 500.

After analyzing the index chart, analysts of the bank noted that the index is somewhat overbought. In this regard, they expect another pullback to occur. However, instead of worrying about a possible sell-off, investors should buy this drawdown, the bank said. In general, they suggest that the US stock market is still in an uptrend.

The bank estimates that the lowest possible support level for the index is at 5,580. This implies a fall of about 5% from the current level.

At the same time, analysts expect the base index to rise to 6,000, not excluding a possible rise to 6,266. They are basing this forecast on similarity of the current dynamics with the indicators observed in 2015–2018. If the scenario of that period is repeated, the growth of the S&P 500 will continue to record peaks.

In addition, breadth, or a measure of the number of stocks rising in price relative to the number of stocks falling in price, is improving. This also favors the S&P 500's growth, the bank experts noted.