Bank of America forecasts S&P 500 correction in Q3

Bank of America’s technical research team warns that the S&P 500 index may enter a three‑wave “abc” correction during the third quarter of 2026. Analysts cite diverging price‑momentum signals, a red‑13 TD Sequential indicator and Elliott Wave analysis as reasons the market could lose steam. A drop to around 6,850 points – roughly a 7.6% decline from current levels – is projected, with the 7,334 level identified as a critical support threshold.

The firm expects volatility to rise in the summer but predicts a recovery in the fourth quarter, describing a potential “Christmas rally” later in the year. Investors are advised to shift toward more defensive portfolio positions and increase hedging ahead of the anticipated pullback.