S&P 500 to Rally Into April, Breadth Shows: Technical Analysis

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By Julie Cruz

March 10 (Bloomberg) -- The Standard & Poor’s 500 Index may continue its rally into April as measures based on the ratio of rising to falling stocks shows the market “structure remains bullish,” according to technical analysts at UBS AG.

The Bloomberg Cumulative Advance-Decline Line for New York Stock Exchange shares, which is calculated by subtracting the number of falling from the number of rising stocks, rose to the highest level since May 2008 yesterday.

“The market volume isn’t that impressive but as long as market breadth is still that good and sentiment is not at extreme levels we stick to our bullish tactical strategy,” Zurich-based Michael Riesner and Marc Muller wrote in a report dated yesterday. “We favor an April top, and still see our final SPX target at between 1,200 and 1,230.”

The S&P 500 rose 0.2 percent to a seven-week high of 1,140.45 yesterday on the anniversary of the 2009 bear-market low for the benchmark.

“On a very short-term basis, the market looks overbought,” the analysts wrote. “The likelihood is high to see a consolidation/breather starting later this week” before the rally continues into next month. “Continue to buy the dips,” the analysts wrote.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.