Sept. 14 (Bloomberg) — The Standard & Poor’s 500 Index may be poised for a 5 percent retreat, based on an analysis by Schaeffer’s Investment Research using so-called moving averages. The U.S. equity benchmark, which closed at 1,042.73 on Sept. 11, could drop to as low as 983.36, its average price during the last 50 days, said Todd Salamone, vice president of research at Schaeffer’s. “There’s some hesitation to commit to stocks at these levels,” Cincinnati-based Salamone said in a phone interview. “Some people are afraid we’ve come too far, too fast.”
The S&P 500 has rebounded 54 percent from a 12-year low on March 9 amid signs the recession is easing as companies from Johnson & Johnson to Goldman Sachs Group Inc. posted earnings that beat analysts’ estimates. The rally pushed the valuation of the index to about 19 times the reported earnings of its companies, the highest level since 2004, according to weekly data compiled by Bloomberg.
After the decline, the S&P 500 may rise to 1,053.46, which corresponds to its 80-week moving average, Salomone said. “That 1,000 area has been a kind of a magnet because it also represents a 50 percent retracement from the March low” he said. “If we get through that level, it will be very encouraging. It would truly be a testament to the market’s momentum.” In technical analysis, investors study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.