RBC Capital Markets said the ultimate low in the U.S. equity markets might not have been reached, but a bottoming process has probably started.

The brokerage said most of the technical indicators suggest that an intermediate-term low is near. Readings from sentiment, positioning and internal momentum indicators reveal much more damage under the hood than at the index level.

Importantly, the recent and sharp skew to the short side of this market is not confirmed by the macro data. Leading domestic and global indicators remain significantly above their boom-bust levels, RBC said. The Japanese disaster might create a worrying economic air-pocket, but this should prove transitory given the rebuilding phase likely to take place throughout this year and beyond, it added.

A stock-by-stock examination shows that Technology, Industrials and Materials have been among the hardest hit. Meanwhile, Asian – particularly Japanese – exposure has proved to be an additional performance headwind.

The brokerage upgraded S&P 500 Industrials to Overweight from Market Weight, saying corporate spending on machinery and equipment is strong and is likely to remain so given low capital costs, healthy corporate cash flows, help from the accelerated depreciation tax allowance and an investment cycle that is barely keeping up with the pace of depreciation. Robust readings from global leading data also help to paint a fairly attractive fundamental picture for a sector that derives about 40% of its revenue from abroad.

RBC trimmed S&P 500 Health Care from Overweight to Market Weight, saying the sector is inexpensive, has a reasonable history of outperforming as economy-wide earnings momentum crests, and offers a decent hedge against economic and market-related shocks. However, performance drag from the heavily-weighted Pharma group is likely to linger. Fundamentals are struggling to keep up with the rest of the market and enticing dividend yields, not unlike those for Diversified Telecom, are unlikely to attract broad sponsorship until closer to the time when the economy approaches its stall speed.

At its worst, the S&P 500 was down 6.5% in this month-long correction. The Nasdaq was off closer to 8% at its recent nadir. The market seems to have found a somewhat more stable footing over the past couple of days and, while the ultimate bottom might not be in, it seems like a good time to put some idle cash to work, RBC said.

The brokerage said sentiment, positioning and breadth/momentum indicators suggest that significant near- to intermediate-term damage has taken place even while the correction for the broad benchmarks has been shallow.

RBC said it recommends that investors seek opportunity among cyclical sectors and groups as well as hard-hit stocks with foreign exposure.