The US market setback started Friday and stocks will see a 15 percent correction during the next three weeks, but a market turnaround will push the S&P to 1,200 by next spring, according to Robin Griffiths, technical strategist from Cazenove Capital.
“It always looked to me as though it would be about a 15 percent setback,” he said, adding that stocks “won’t need many days like Friday to achieve that.”
The S&P500 closed down almost 3 percent Friday at 1,036, and this trend will continue for the next three weeks, Griffiths said.
“Artificial” stimuli are partly to blame for the negative fourth quarter outlook because stimulus measures, such as Cash for Clunkers, have “stolen growth from the period we’ve now got to go into,” he added.
This expected 15 percent setback for the S&P could push it down to 900 points, but stocks will rebound, he said.
“The good news is the seasonal forces all turn positive next spring, and it (the S&P500) might get up to about 1,200 on that.”
The market setback could also boost the value of the US dollar as “this is the condition that gives you a dollar rally,” Griffiths said, adding that the dollar index could move as high as 80 points during the next period.