Bank of America’s Bartels Says S&P 500 to Rally on ‘Breakout’

By Lu Wang

Jan. 6 (Bloomberg) -- The Standard & Poor’s 500 Index will gain 8 percent after it jumped to a 15-month high, said Mary Ann Bartels, a Bank of America Corp. technical analyst.

Bartels, who predicted in October that U.S. stocks would plunge, said that call was “premature” and she now expects equity markets to add to the biggest yearly rally since 2003.

“In the near term more gains are likely,” Bartels wrote in a note to clients yesterday.

The advance in the first two days of this year lifted the S&P 500 out of a 3 percent range where trading was confined for most of November and December. The “breakout,” with more stocks rising than falling, suggests the index will climb to as much as 1,230, Bartels said. The S&P yesterday advanced 0.3 percent to 1,136.52, the highest level since October 2008.

New York-based Bartels, ranked second among analysts who study price charts in Institutional Investor magazine’s most recent survey, predicted three months ago that the market might slump as much as 20 percent from its September peak before resuming its gains. Since then, the S&P 500 lost as much as 5.6 percent from an Oct. 19 high, then rallied to complete a 23 percent increase for the year.

The index has surged 68 percent from a 12-year low in March on expectation the worst recession since the 1930s is ending. As the market recovered, the Bloomberg Cumulative Advance-Decline Line for New York Stock Exchange composite shares, which is calculated by subtracting the number of falling stocks from the number of rising stocks, increased to 70,781 on Jan. 4. That’s the highest level since October 2007, when the S&P 500 reached an all-time high of 1,565.15.

The benchmark index for U.S. stocks exceeded 1,120.84 on Dec. 24, recovering half its losses from the 17-month decline that ended in March. Analysts who use historical charts and trading patterns to predict the direction of equities say the Fibonacci system of forecasting stock prices indicates the S&P 500 will reach 1,225.7.

Most U.S. stocks gained yesterday, as financial shares rallied and a ninth day of gains in crude oil boosted energy companies. About eight stocks advanced for every seven that fell on the New York Stock Exchange. The S&P 500 added 0.3 percent to 1,136.52 in New York. The Dow lost 11.94 points, or 0.1 percent, to 10,572.02.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net