It Is Still A Bear Market Rally, According To Credit Suisse, Citing History As Evidence

According to Andrew Garthwaite, global equity strategist at Credit Suisse, despite the magnitude of the U.S. stock market comeback, this is still a bear market rally, not the start of a new bull market, and even though the milestone achieved on the daily chart is noteworthy, this is still a bear market rally.

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There has been an increase of 11% in the S&P 500 from its October low, which includes a 3% increase in 2023. The S&P 500 index would confirm a new bull market if it rallies more than 20% and reaches a new all-time high in order to signal a new bull market.

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It has also been announced by many chart analysts that the S&P 500 has broken above its average price of the last 200 days, a measure that is often used to determine whether a trend is long-term or short-term.

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This is one of the largest bear market rallies in history, Credit Suisse found. It also found that many bull markets have had rallies of this size before reaching the 200-day average before falling back into bear market territory again.

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Credit Suisse notes, for example, that the S&P 500 rallies starting from March 1982 and again in September 2001 also extended above the 200-day average price before failing, both times in the months of July to September.

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According to Garthwaite in his report, “the bottom line is that it is close to the average bear market rally; however, we need to keep in mind that bear market rallies can be much bigger and longer,”.

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Additionally, Credit Suisse also pointed to rallies of bear markets on Japanese and Nasdaq stock exchanges to support their argument that this is just a bounce that will eventually fade away.

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Among other things, the firm studied something called the "Coppock Curve," which it says has proved to be a reliable method for predicting the end of bear markets in the past. This indicator from Credit Suisse is calculated by summing the 14-month rate of change of the S&P 500 index with the 11-month rate of change to get the "ten-month weighted moving average.".

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In order to trigger the Coppock Curve indicator as evidence that the bear market may be over, Credit Suisse's analysts said the S&P 500 would have to surge to 4,400 and remain above it until June.

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In the afternoon trading on Tuesday, the S&P 500 closed at 3,986.37 points.