This is a Bear Rally, True Lows in the S&P; 500 are Below 3600 - BofA Strategist

© Reuters. This is a Bear Rally, True Lows in the S&P 500 are Below 3600 - BofA's Hartnett

By Senad Karaahmetovic

Bank of Americas top strategist continues to see the ongoing bounce in the S&P 500 as a relief rally that will end likely around 4200.

His bear case scenario is a rotation around these levels to print true lows, which are likely below 3600.

'Inflation shock'...check, 'rates shock'...check, 'recession shock'... check, and 24 hours after abandoning 'forward guidance'/embracing 'data dependence' US enters 'technical recession'; since catalyst for bear market was repricing of interest rates (took SPX from 4800 to 3800), yields now falling & equities rallying makes sense, the strategist said in a client note.

He noted that biotech, China tech, and Bitcoin have all soared in recent weeks, but we are yet to witness a peak in yields.

The strategist believes it is too early to reposition for Fed pivot bull trade.

As far as flows are concerned, he said investors poured $27 billion into cash in a week to Wednesday, July 27. Moreover, $5.6 billion went to equities, which is the first inflow in 6 weeks.