Bank of America (BofA) Managing Director and Global Head of Technical Strategy Paul Ciana issued a client report on June 26, warning that the S&P 500 index faces a three-wave (ABC) correction from July to September. If the pattern develops as expected, the index target would drop to 6,850 points, a decline of approximately 7% from recent levels.
Three Technical Signals Triggering the Bank of America Warning
The BofA technical strategy team listed the following three observations in the June 26 report:
Momentum and Price Divergence: The S&P 500 has risen nearly 17% from its March low, but as of last Friday before the report, the 14-day RSI was approximately 49, significantly lower than the level at the peak of this rally, showing a divergence characteristic of weakening momentum
TD Sequential 'Red 13': The TD Sequential indicator signal that appeared on June 1, within BofA's technical framework, indicates that the momentum of the current uptrend is nearing exhaustion
Elliott Wave Fourth Wave: The S&P 500 fell to 7,334 points on June 10, which BofA identified as matching the fourth wave pattern of Elliott Wave Theory and viewed it as a precursor to a subsequent pullback
Ciana said in the report: 'If a new high near 7,741 points appears, please be cautious because this could be a "bull trap," consistent with an expanding sideways pattern.'
BofA's ABC Correction Framework: Basis for 6,850 Points and Fourth Quarter Rebound Expectations
BofA adopts the 'ABC correction' framework of Elliott Wave Theory, describing three consecutive phases: starting from a low, rebounding to a high, and then declining again. If it ultimately declines to 6,850 points, that represents a drop of approximately 7% from recent levels. Ciana's report noted that the BofA technical strategy team still expects a rebound in the fourth quarter, but a longer adjustment period could last into October.
BofA also stated that this warning is based on technical analysis and does not constitute a macro forecast of corporate profits or economic activity; it also pointed out that because S&P 500 constituents are concentrated in a few large technology companies, the impact of a technical pullback on the index may be greater than historical averages during periods of broader constituent dispersion.
Kerux Financial's Laut's Additional Warning and Kevin Warsh's Sintra Speech
Kerux Financial Chief Investment Officer David Laut said in an interview with InvestmentNews that the market volatility in June was just 'the tip of the iceberg.' Citing three factors—overvaluation, geopolitical uncertainty, and thin summer trading volumes—Laut warned that the market could see a larger pullback of 10%-20%, and noted that August is typically a slow month for stocks and pullbacks have occurred in the past few years. Laut recommended that investors maintain an underweight position in technology stocks (Mag 7) and diversify into small-cap stocks, international stocks, and value stocks.
Fed Chair Kevin Warsh is scheduled to deliver a speech on Wednesday at the European Central Bank forum in Sintra, Portugal. BofA and multiple analysts pointed out that any statement by Warsh regarding expectations for the Fed's interest rate policy is a key data point for judging the direction of the current technical pullback.
Frequently Asked Questions
What is the expected time window for the 6,850 points target set by Bank of America?
In the report issued by BofA on June 26, 2026, Paul Ciana set the expected adjustment time window as July to September, with a possible extension into October if the adjustment period is prolonged. BofA's technical strategy team still expects a rebound in the fourth quarter, with the adjustment period ending before that quarter.
Does BofA's warning represent a bearish judgment on the U.S. economy?
BofA's report clearly states that this warning is based on technical analysis indicators and does not constitute a bearish forecast of corporate profits or macroeconomic activity. Ciana's analysis focuses on the deterioration of market momentum and technical signals, not a negative judgment on fundamentals.
When is Kevin Warsh's speech in Sintra, and why is the market paying attention?
Fed Chair Kevin Warsh is scheduled to deliver a speech on Wednesday (specifically at the ECB forum in Sintra). Analysts including BofA and Kerux Financial have noted that any statement by Warsh on expectations for the Fed's interest rate policy is a key reference for assessing whether inflationary pressures are worsening and its impact on the magnitude of market corrections.
