The S&P 500 index is already down 20% versus the start of the year, but a Piper Sandler expert warns there’s more room to the downside in the coming months.
Johnson’s remarks on CNBC’s ‘Worldwide Exchange’
According to Craig Johnson, there’s not one but several indicators that suggest the market isn’t at a tradeable bottom yet. This morning on CNBC’s “Worldwide Exchange”, he said:
Look at a few basic indicators like percent of stocks above 200-day moving average, relative strength index, the MACD, even our 40-week technique; they’re not at levels yet that are commensurate with historical washouts of 2020 or 2018.
Johnson warns the S&P 500 could tank another 10% from here before it finds a tradable bottom. Such a decline will bring the benchmark back to its pre-pandemic 3,500 level.
Johnson reiterated his year-end price target
Interestingly, however, the Piper Sandler analyst expects downside to be short-lived. He’s convinced the inflationary pressures will start to wane in the back half of 2022, helping SPX to end the year at 4,775 level.
Target had inventory and cost pressure issues. Those are more deflationary than inflationary. If that spreads across the retail sector, some of the inflationary pressures could start to wane. I also think you’d see 10-year bond yields start to come down.
His price objective means the benchmark will recover virtually all of its 2022 losses before the year comes to an end. U.S. inflation stood at a near 40-year high of 8.30% in April.
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