Market technician Craig Johnson from Piper Sandler is sounding the alarm bells, warning investors to pay attention to the warning signs flashing in the markets. Johnson predicts a 10% tumble in the S & P 500 this summer, citing poor market breadth and waning momentum as red flags that investors are ignoring.
Comparing the situation to driving a car with an Engine Warning Light on, Johnson emphasizes the importance of heeding these warning signals before it’s too late. Despite the market’s recent surge, fueled by the outperformance of AI mega-cap tech companies like Nvidia, Johnson believes that a correction is imminent.
With Nvidia already experiencing a 10% drop from its 52-week high, Johnson is raising his cash levels to 20% and reducing his equity exposure to 80%. He anticipates the S & P 500 ending the year at 5,050, 7% lower than its current level.
As investors brace for a potentially choppy second half of 2024, Johnson’s bold call to heed the warning signs and prepare for a market correction is resonating with many. It remains to be seen whether investors will take heed of these warnings or continue to ride the wave of F.O.M.O in the markets.
