Are you prepared for a potential 10% stock market drop? According to Renaissance Macro Research founder and technical strategist Jeff DeGraaf, three bearish factors may contribute to a significant decline in the market in the upcoming weeks.
DeGraaf predicts that the Nasdaq 100 could potentially drop to 17,000, representing a 10% downturn from current levels. He is also monitoring the S&P 500’s early August low of 5,120 for a possible retest of support, which could result in a 7% decrease from where the market currently stands.
One of DeGraaf’s concerns is the bullish sentiment among traders, particularly small speculators on the NDX futures who remain very net long. This suggests that many investors view the recent weakness in the market as a buying opportunity, which may not be indicative of a market bottom.
Additionally, historical data shows that September tends to be a challenging month for stocks, coupled with the fact that technology stocks, which have been leading the market higher, typically underperform in the three months following the Federal Reserve’s initial interest rate cut.
DeGraaf also believes that there could be further weakness towards the end of September and early October if the decline continues. This prolonged period of stagnation could lead to frustration among investors as stocks see minimal movement.
Furthermore, DeGraaf warns of a potential quick flush of positioning among trend followers and panic among investors, similar to what occurred in early August during the yen carry trade blowup. Until such events unfold, he believes that short-term stock market risks remain skewed to the downside.
To stay ahead of these potential market challenges, it’s crucial to continuously monitor your investments, reassess your risk tolerance, and consider diversifying your portfolio to weather any market storm.
For more insights into navigating the financial markets during uncertain times, stay tuned to Extreme Investor Network for expert analysis and actionable advice to help you thrive as an investor.