The market rally won't last and this summer will be rough as the S&P 500 could go as low as 3,200, says Fairlead's Katie Stockton

This post was originally published on this site

Traders work on the floor of the New York Stock ExchangeScott Heins/Getty Images

  • This summer will be rough for markets and more downside is possible, Fairlead’s Katie Stockton told CNBC Tuesday.

  • The S&P 500 is down roughly 14.4% year-to-date, though Stockton said the current relief rally will lose momentum.

  • “Worst case scenario is probably around 3,200,” she said.

US stocks have seen some relief in recent weeks, but the rally won’t last and the S&P 500 still has downside potential, according to Fairlead’s Katie Stockton.

“I think we’re in store for a pretty rough summer,” Stockton told CNBC Tuesday. “We do still have those negative momentum gauges intermediate and long-term.”

Stockton maintains that the US is currently in a cyclical bear market within a secular bull market. The S&P 500 is down roughly 14.4% year-to-date, though the sell-off alleviated some as the index staged a 9% rally from its May 20 low.

She expects the rebound to lose steam soon, and said a 3,815 level for the S&P 500 “probably won’t hold.” On Tuesday, the index was down 0.5% at about 4,100.

“Importantly, the S&P 500, even though it might feel it, is not yet long-term oversold,” Stockton said. “We still have some room for downside.”

The market may establish a long-term low somewhere below 3,500, she noted, and relief may not arrive until around September this year.

“Short term up, intermediate and long-term down,” Stockton said. “Worst case scenario is probably around 3,200 which is the second support, and that support would actually be targeted by a breakdown below that 3,815.”

Read the original article on Business Insider