BofA Warns “Not Enough Capitulation” For Bottom Yet

Despite uber-hawkish signaling from Fed vice-chair Brainard, US equity markets are bouncing today (after 7 straight down days for the Nasdaq), once again prompting the same-old-same-old remarks that “is this the low?” or “is The Fed ready to Pivot?” or some mixed version of the two (despite oil prices plunging like there’s a global recession imminent)…

The problem is – as BofA’s Technical Strategist Stephen Suttmeier remarks in his latest note, there has simply not been enough capitulation yet for a low to be in…

The S&P 500 (SPX) tested 3900, which is where the downside count for the August head and shoulders top, 61.8% retracement of the June-August rally and the July breakout and retest zone converge.

Tactical sentiment from the 5-day put/call and 3-month VIX vs VIX suggests angst and not capitulation.

This is a risk entering the challenging month of September and suggests that 3900 may not hold.

But some breadth indicators are tactically oversold…

But, if 3900 gives way to bearish pressure, the SPX does not have support until the late May low near 3810. The late June into mid July lows offer the next support at 3738-3712, but a break below the 61.8% retracement at 3899.84 would increase the risk for a full retracement back to the June YTD low at 3636.

Suttmeier’s comments support what Savita Subramanian said last week, “wait for more signs” before buying the big dip.