With S&P 500 Decfing more than 10% in two trading sessions, the predictions of the worst scenarios were washed on Wall Street. The strategists of various banks of Wall Street warned of an imminent recession and lower stocks due to the tariffs in Trump.
But Craig Johnson, chief market technician at Piper Sandler, saw this as a timely moment to repeat his point of view according to which the S&P 500 would end the year at a fee record of 6,600.
This represents an increase of 22% compared to levels on Friday afternoon.
“Don’t Stop Believin” was the title of Johnson’s note to customers, reiterating its optimization on the stock market despite the high volatility of Trump’s commercial prices.
Business Insider met Johnson this week to better understand why he sticks to one of the highest price of Wall Street.
On the one hand, Johnson quickly stressed that “it was not until April” and that there is a lot of time for the stock market to digest recent losses, then consolidates, then increases.
“I feel like I’m giving this market some time,” said Johnson. “There is a lot of volatility and if we will start to see a more rational commercial environment coming into play, then the multiple multiple on this market can come back and the expectations of the reductions in profits may not be as high as what people were trying to price.”
Johnson’s positive point of view, which is based on the Trump administration’s back-peddre some of its tariff initiatives, took place on Wednesday when Trump instituted a 90 -day break On “reciprocal” prices for most countries.
The stock market exploded by around 10% after this announcement.
“We have just set up one of the best days after the Second World War on the market and I do not think that anyone expected to move so large, but ultimately, there is probably even more room for this market to finally, I think that work on the rise,” said Johnson.
The CNN Fear & Greed index plunged as low as 4 last week, the second lowest level in its history, only beaten by two readings in March 2020.
Another indicator of feeling, the Envestor Senture Survey Aaii also showed that the lower investor is seated at extreme levels competed only by the 2008 financial crisis.
“Negativity is just so high,” said Johnson, stressing that recent flow data has shown investors shares and purchase funds on the money market.
And when negativity becomes extremely extreme, it generally serves as a counter-current indicator that actions are ready to increase, said Johnson.
“If you are going to be emotional on the market, you will lose every time,” said Johnson. “You cannot be emotional on this subject, you must enter and you must, when people vomit stocks, you must be there to clean it.”
From a technical point of view, Johnson sees a lot to love even in the midst of disorders supplied by trade.
On the one hand, the S&P 500 fell up to 4,835 in trading before the market this week. This is significant because it tests the previous resistance as a support, a key principle of technical analysis.
The S&P 500 culminated at 4,818 in January 2022. Price memory of this level prompted buyers to precipitate the market.
“It was a fairly good field of support,” said Johnson. “I mean, I don’t know if I could ask for much more perfect than that with everything that is screwed up between feeling, our gauges, the levels of support; I mean, it was literally almost scary.”
Johnson also pointed out that the stock market has lit extreme surveillance readings, which generally precede a solid rebound.
Of all the actions of the Johnson’s coverage universe, only 5% was negotiated over their 40-week mobile average.
“What I’m going to tell you is that I don’t often see such low figures,” said Johnson. It would be optimistic if this number undergoes a net rebound, indicating that the deeply occurred levels improve.
In the end, the technical strategist expects the S&P 500 to test 5,500 as resistance, then in case of success, it will probably be stuck in a side range of 5,500 to 5,800.
“And we end up cutting there for some time until people have a large handful of what will happen with trade,” said Johnson.
Any clarity of commercial policies and potential transactions could ultimately help to eliminate uncertainty and catapult the stock market to record summits by the end of the year.
“I don’t stop saying, don’t stop believing because again, when the markets are fighting, they get this kind of washing,” he said. “But when you get to this kind of level, that’s where you have to buy actions.”
