S&P 500 to likely stage a year-end rally - BofA

BofA technical analyst Stephen Suttmeier: "The SPX is in cyclical and secular uptrends. A rising 40-week MA near 4200 defines a cyclical bull market and a rising 200-week MA near 3900 reflects a secular bull market. We think 2023 is like other bullish turns in 2020 (COVID-19), 2019 (China trade war), 2016 (Brexit and Trump elected) and 2012 (Eurozone crisis). Corrections from summer peaks into November 2012, November 2016 and October 2019 tested/undercut the rising 40-week MA and preceded yearend rallies in those years. The late 2023 setup resembles those from late 2012, late 2016 and late 2019. This suggests that a test or undercut of the 40-week MA could precede a yearend rally."

"Last week’s reversal off Wednesday’s spike low on the SPX at 4238 did not coincide with capitulation on the 3-month VIX relative to the VIX (VIX3M/VIX). Given October’s reputation for big intra-month drawdowns (see report Market Comment: 19 Sep 2023), we believe that an oversold capitulation event on a move below 1.0 for the VIX3M/VIX is more likely in October. This is likely a key ingredient ahead of a yearend rally for the SPX."

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