Bank of America technical analyst: U.S. stocks will undergo a "three-wave correction" this summer

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The head of Bank of America's technical research warns that the recent rally in the S&P 500 index is showing signs of fatigue, and investors should prepare for a possible 'three-wave correction' in the coming months.

Paul Ciana, Head of Technical Research at Bank of America, pointed out in a research report released Thursday that the S&P 500 index has risen nearly 17% since its March low, but since reaching a recent high on June 2nd, the rally has shown clear signs of exhaustion.He expects the index could drop as low as 6850 points, down about 7.6% from current levels. "The summer roadmap is a three-wave correction," Ciana wrote in the report.

Ciana stated, "The rebound after the ceasefire is becoming increasingly volatile, and correction risks continue to accumulate," price action appears "overvalued," and momentum is weakening, which means investors should adopt a "defensive posture" during the July to September period. He also warned that if the index moves toward a new high of 7741 points, it may just be a "false breakout."

Adjustment Targets and Support Levels

Ciana clearly outlined the key price points for the downside path in the report.He believes the S&P 500 index will find support successively at 7200, 7025, and 6850 points, with 6850 points being his expected lowest correction target.

He also pointed out deeper risks: "With summer just beginning, a more persistent double correction pattern lasting into October remains a key risk." This means both the time span and magnitude of this correction may expand further.

Divergence From Wall Street's Mainstream Bullish View

Ciana's warning is in clear contrast to the current mainstream optimism on Wall Street. Last week, Societe Generale strategist raised the S&P 500's year-end target from 7300 to 8000 points; JPMorgan and Fundstrat also hold bullish year-end outlooks for the index.

However, Ciana is not the only cautious voice within Bank of America. Earlier this month, BofA strategist Savita Subramanian and others warned investors that there are "too many risks" in the current market and suggested to "take profits." Building on this, Ciana further provided specific correction path forecasts from a technical perspective, offering reference for risk management of holders.

Risk warning and disclaimerThe market has risks, and investments should be made cautiously. This article does not constitute personal investment advice, nor does it consider the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article fit their particular circumstances. Invest at your own risk. ```