The equities markets and stock exchange traded funds are oscillating as the bulls and bears play tug-of-war over the eurozone problems. While stocks have regained ground on overselling and easing pressures, the over all market may still be stuck in volatile trading, according to S&P analysts.
The SPDR S&P 500 (SPY) has gained 2.6% over the last week after giving up 4.1% over the past three months.
If the current bearish conditions are really over, the S&P 500 will have recorded its 55th pullback, or a decline of 5% to 9.99%, since WWII, dodging a full "correction" by just 0.06%, Sam Stovall, Chief Equity Strategist at S&P Capital IQ, writes in a research note.
If the recovery this time around is similar to prior recoveries from pullbacks in excess of -8%, the S&P 500 could jump over its 1419 April high in 77 calendar days, Stovall noted.
Stovall also pointed out that 10-week average correlation of S&P 500 sub-sector performances have been a good indicator for identifying turning points. For instance, sectors and sub-industries move in tandem with the S&P 500 in periods of crisis. The average correlation has been 0.63 since 1995, but as of June 8, it was 0.86.
However, Stovall noted that relief rallies have also occurred during drawn-out market declines. Currently, the S&P 500 has been testing its 200-day supporting levels and a 10% decline threshold, but the markets tend to slip further after the relief rally has run its course.
"So while some indicators are hinting that the coast may be clear, others indicate that choppy market action may be with us for a while longer," Stovall said in the note. "Therefore, we can only say for now that the market is undergoing a counter-trend rally that should take the S&P 500 to the 1350-1360 resistance area."
SPDR S&P 500
Max Chen contributed to this article.
Disclosure: I am long SPY. Tom Lydon's clients own SPY.