Bank of America expects a corrective third quarter for the S&P 500, with analyst Paul Ciana flagging an exhausted uptrend and a possible ABC correction toward 6,968. Bulls point to improving breadth, with 68% of stocks above their 200-day moving averages.
Bank of America reads the S&P 500's third-quarter setup as corrective, a call analyst Paul Ciana builds on a stack of technical warning signs. The index climbed from April but turned rangebound by late May, and the bank sees momentum fading rather than resetting for another leg higher. That reading leans heavily on technical analysis rather than earnings or macro data.
Why the bears have the edge
Ciana's bear case rests on an exhausted uptrend, a diamond top pattern, a corrective wave count, weaker momentum, and defensive Q3 seasonals in year two of the U.S. Presidential Cycle. Those signals point one way for the bank: lower.
BofA had already flagged a defensive stance to investors. It advised tightening trailing stops or adding put protection on May 27, a view the firm says the subsequent volatility spike and 5% pullback in the first half of June validated. From here, the bears project an ABC correction unfolding toward 7,122 and 6,968.
The bull counterargument
The other side of the desk is not convinced. Bulls lean on correction-through-time, a triangle continuation pattern, and improving breadth, noting that the share of stocks above their 200-day moving averages has risen to 68% and the Advance-Decline Line has reached a new high. Broadening participation, in their reading, argues against a deeper slide.
BofA carried the same technical lens across other markets. It expects U.S. 10-year Treasury yields to break out toward 4.65% and potentially 4.82%, stays bearish on the euro toward 1.1240, and sees Brent crude carving out a $65-85 range as an oversold rebound begins.
Source: Investing.com (snippet-based)
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