"Wall Street Correction is Near: Analysts Warn"

Correction Expectations Rise on Wall Street

Recent sharp sell-offs in the U.S. stock markets have raised concerns among analysts about a correction process. The S&P 500 index closing below its 50-day moving average raises the likelihood of a significant drop of around 10%.

Sharp Sell-offs and Index Breakdowns

The sales that occurred on Monday caused the S&P 500 to dip below its 50-day moving average for the first time in 139 sessions. This situation also led to the breakdown of the second-longest trend line of the 2000s. The index closed more than 50 points below the 6,725 level.

Analysts' Warnings

Lee Coppersmith from Goldman Sachs warned that movements below this critical level could shift trend-following quantitative funds from buyers to sellers. Dan Russo, co-chief investment officer from Potomac Fund Management, stated, “There is serious damage beneath the market. A breakdown below the 50-day moving average could lead to a worsening situation and new low levels.”

Nasdaq and Market Health

John Roque, head of technical analysis at 22V Research, noted that the Nasdaq Composite index is sending bad signals. He emphasized that most of the approximately 3,300 stocks trading on the index are operating at their 52-week lows. This indicates weakness in the underlying market and reduces the likelihood of an upward movement.

Correction Probabilities and Recommendations

Roque anticipates that the Nasdaq could decline by up to 8% before testing the support around 22,000. Dan Wantrobski from Janney Montgomery Scott predicts that the historical rise of the S&P 500 has come to an end and further turbulence may be seen in the upcoming period. Wantrobski stated, “The S&P 500 could experience a decline of 5% to 10% by the end of December.”

Timing of the Correction

Wantrobski indicated that a slight correction in the S&P 500 already occurring could be better to prevent a more severe correction later on.