“After undercutting the 200-week moving average, regaining the 40-week moving average is critical for the S&P 500 to maintain its secular bull market and avoid a shift into a secular bear market. The failure to reclaim the 40-week moving average after correcting to or below the 200-week MA is a secular bear market pattern,” Suttmeier explained.
“If the S&P 500 cannot regain its 40-week MA during the best part of the Presidential Cycle, we would view this as a risk to the secular bull market,” Suttmeier said.
He sees potential for a tactical bearish sell-off to as low as 3,200 if the 3,700 level continues to act as robust resistance for the index. A plunge to that level represents a potential downside of 13% from current levels.
