Why JPMorgan Stock Could Have More Upside Potential Than The S&P 500 With Inflation Data Ahead

After a spectacular 2021 in which it gained 29%, JPMorgan Chase & Co JPM is suffering along with the S&P 500 index and is down 24% at $120.70.

Obviously, the fears of a potential recession and the impact on loan growth is outweighing the benefit of rising interest rates for the bank stock.

With JPMorgan's third-quarter earnings a month away, it's time to take a technical look at this issue, making it the PreMarket Prep Stock of the Day.

JPMorgan Late To Find A Bottom: JPMorgan peaked a few days after the S&P 500 index at $169.81 on Jan. 13 and only six days later made a short-term bottom at $139.57. It followed the index through its peaks and valleys, but did not find a bottom until much later in the summer.

While the index bottomed on June 17, the hangover from a second-quarter miss did not allow the bank stock to bottom until July 14 at $106.06.

That low came in between its November 2020 low ($97.86) and its December 2020 low ($118.11). Interestingly, that low was put in on the day JPMorgan disappointed the Street with its second-quarter results. 

The back-to-back EPS miss for the banking giant was the first of its kind in the last 10 years.

Related Link: Why These 4 Analysts Have Different Takes On JPMorgan Chase's Q2 Results

In Tune With Index At August High, September Low: Both JPMorgan and the S&P 500 peaked on Aug. 16, with the issue peaking at $124.24. Once again, the two issues bottomed on the exact same day, Sept. 6, when JPMorgan matched its Sept. 1 low ($111.91), falling to $112.07.

From that low, JPMorgan has outperformed the index. At $120.70, the issue is higher by 7.9%, while the index has added only 5.66%.

JPMorgan Moving Forward: The short-term fate of the index and JPMorgan could very well be determined by Tuesday's release of the August data for the Consumer Price Index. The price action in the index and the bank has indicated the Street is looking for a soft number.

That would confirm that July’s inline reading was not a fluke and peak inflation may be behind us. In turn, the Federal Reserve Bank may lighten up on the rate at which it is raising interest rates.

Since it has been prudent not to fight the Fed, both when easing and tightening, any scaling back on the rate of future interest rate rate hikes will send the markets into orbit.

Let's Get Technical: On the upside, both for the S&P 500 index and JPMorgan, a test and breach of the August high may incite a buying frenzy. In that case, there may be more potential upside for JPMorgan than the index.

The reason is the index was able to take back more than half of its losses from its January high to its June low, briefly recapturing over half its losses. JPMorgan never even came close to gaining back half its losses, as the rally stalled well shy of the 50% retracement ($138), only reaching $124.24 before retreating to its current level.

On the downside, a breach of the summer lows for each of the issues could easily make way for the test of the yearly lows.

JPMorgan CEO Jamie Dimon. Benzinga file photo by Dustin Blitchok.