Wolfe Research is cautioning investors that the S&P 500’s most recent pullback may not yet represent the low point for the benchmark. In a client note published Tuesday, analyst Rob Ginsberg argued that several technical measures do not indicate widespread investor panic, even though the index recently marked a new three-month low.
The firm highlighted a mix of breadth and volume indicators that point to muted selling dynamics. Wolfe Research noted that down volume accounted for about 75% of trading volume, and put/call ratios remained subdued, but overall positioning has not shown the sort of capitulation typically seen at market troughs.
Ginsberg also observed that the VIX has moved back toward levels experienced during fourth-quarter sell-offs, yet the volatility curve has not "really inverted" - a technical trait the note identified as having helped mark the lows during October and November equity declines. That absence of an inverted volatility curve suggests to Wolfe Research that further downside cannot be ruled out.
On the support front, the research team pointed out that buyers have repeatedly defended the 6,780 level, which so far has limited losses from becoming steeper. Nonetheless, Wolfe Research warned that the market may still require what it called "one real flush lower" to clear out stop orders and reset investor sentiment - a move it quantified as approximately 6,500.
Sector note - Within the broader market weakness, Wolfe Research observed areas of relative strength. Software shares were singled out as one pocket of resilience, with the IGV software ETF closing higher on the day and marking five gains in the last six sessions.
Ginsberg’s note frames the current environment as one where technical conditions have produced notable weakness but not the extreme capitulation that commonly signals a durable bottom. As a result, the firm suggests investors be prepared for the possibility of a deeper corrective leg that would clear stops and potentially set the stage for a more sustained recovery afterward.