Piper Sandler is advising investors not to act hastily following the market’s recent rebound, cautioning that conditions remain delicate even after the bounce.
Analyst Craig Johnson said market participants should remain measured and “don’t trip buying the dip,” emphasizing that confidence behind the latest upward move has been limited.
According to Johnson, both the S&P 500 and the Nasdaq “still languish below their 50-day moving averages,” keeping the possibility of “another leg down” firmly on the table.
The firm observed that the recovery attempt lacked sustained momentum, with major indices surrendering nearly half of their gains by Tuesday afternoon.
Given that backdrop, Piper Sandler suggested investors “use this relief rally to trim laggards in Tech and Discretionary rather than aggressively chase a bounce.”
While describing the current environment as a “rotational bull market” that can still reward selective dip-buying, the firm noted that momentum signals are beginning to soften. Measures of market breadth and trend strength have eased, reinforcing the argument for patience.
Energy has stood out as a relative outperformer, benefiting from rising crude prices. Johnson pointed to continued improvement in the sector, supported by oil’s technical setup for a potential breakout above $66.
Piper Sandler also highlighted that a number of large-cap stocks have slipped into oversold territory based on RSI readings, which could pave the way for a short-term rebound. Even so, the firm reiterated that investors should remain disciplined and avoid leaning too heavily into rallies lacking strong underlying support.