Expect a market correction for the S&P 500 this October, technical analyst says

Markets likely to face a reality check later in 2017: ECU Group
Markets likely to face a reality check later in 2017: ECU Group

Global stocks have rallied on promises of large investments in infrastructure and tax cuts in the U.S., but markets are now set for a sharp correction in the second part of this year, Robin Griffiths, the chief technical strategist at investment manager ECU Group has told CNBC.

"We can go up quite a lot more," Griffiths told CNBC on Monday referring to major global benchmarks. However, "all of my work suggests the risk of a correction is in the second half of this year and if I had to name the month I'd say October," he added.

The Dow Jones industrial average reached the 21,000 barrier for the first time last week. Investors have been reacting to President Donald Trump's orders that so far seem to fulfill his campaign pledges. This momentum has been reciprocated in other markets around the world.

The rally in U.S. stocks "can keep going," Griffiths said. "What is wrong is the valuation basis … It's expensive, hideously expensive," he added.

In terms of valuations, the U.K. index offers the better opportunities compared with the U.S., Griffiths noted.

"What had been holding it back for quite a long time is the very large component within it of mining companies and oil companies, so the downtrend of several years in commodities was holding the FTSE down. Now particularly, not only commodities but very particularly industrial metals are one of the strongest asset classes on the planet," Griffiths said.

The recent run up in stock markets has left many contemplating if equities can continue to rise. A survey from the American Association of Individual Investors showed last week that U.S. investors expect stock prices to actually drop over the next six months.

But not every investor shares this idea. According to notable investor Warren Buffett, the rally in stocks is set to continue. He argued in his annual letter last month that the "expectation is that investment gains will continue to be substantial – though totally random as to timing – and that these will supply significant funds for business purchase."

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