S&P 500 might drop as low as 4100 in 1H24, according to UBS analysts

UBS technical analysts are advising caution despite the recent breakout in the S&P 500 because they believe that a bull trap in the US stock market indexes might be about to emerge.

To be more exact, experts believe there is a good chance the S&P 500 is headed towards "an important tactical top as a setup for a negative surprise into Q1."

In a note, analysts stated, "We still think that the current breakouts are the setup for a classic bull trap instead of believing in the start of a larger breakout campaign because of several divergences in our indicator work, toppish trend momentum (mature trend), our sentiment frame in outright contrarian territory, the too low volatility, and taking into account extremely oversold yields."

Analysts predict the possibility of "a meaningful reversal" in light of the preceding technical indicators, which may lead to the index dropping below 4280 in Q1. The SPX would have to break below the pivotal resistance level of 4607 for this to occur.

"The first short signal would be a re-break below 4607."

Analysts predict that the anticipated increase in US rates would put pressure on risk assets to trade early in the new year, in addition to these technological advancements.

"As the setup for a negative surprise in US global equities, we expect a first meaningful reversal in early Q1 with an initial target projection of 4100 into late Q1/early Q2," they said.

(Sources: investing.com, reuters.com)