Wolfe warns that the S&P 500 may fall to 6,500 points before rebounding again

Investing.com - The recent pullback in the S&P 500 may not be over yet, warns Wolfe Research, which suggests the index could experience a deeper decline before conditions for a sustained rebound are met.

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In a report to clients on Tuesday, analyst Rob Ginsberg wrote that although the benchmark index hit a three-month low, several technical indicators “did not show signs of investor panic or fear.”

Wolfe Research pointed out market breadth and volume discrepancies, noting that even with “75% of volume declining and a mild put/call ratio,” investor positions did not show the kind of capitulative selling typically associated with market bottoms.

Ginsberg added that while the VIX has returned to levels seen during the Q4 sell-off, “we have not yet seen the curve truly invert—this feature helped mark the lows during the October and November sell-offs.”

Despite repeated tests, Wolfe Research noted that the bulls have “held the 6780 level strongly,” preventing a larger decline so far.

However, the firm warns that the market may still need “a true dip (around 6500 points) to clear stop-loss orders and reset market sentiment” before a durable recovery can occur.

Some resilient sectors also remain, with Wolfe Research highlighting the performance of software stocks.

Ginsberg pointed out that the IGV software ETF “closed higher for the day, marking the fifth increase in the past six trading days.”

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