S&P 500 Could Fall to 6,850, Says BofA After 17% Rally Sparks Exhaustion Signals

The S&P 500 has rallied nearly 17% from its March low, but Bank of America warns the market may face a pullback.  BofA’s technical strategy team, led by Paul Ciana, warned in a June 26 client note that the index could fall to 6,850 in a worst-case scenario. The bank flagged three separate exhaustion signals behind the call.

The Rally Behind the Warning

The S&P 500 hit its most recent peak on June 2, 2026, then began losing steam. It closed at 7,483.24 on Thursday, July 2, near record territory. Ciana’s team argues the strength of that rally has masked cracks forming underneath the surface.

Momentum Is Diverging From Price

The index kept rising into June, but momentum did not keep pace. The 14-day Relative Strength Index sat near 49 as of June 26, well off its earlier highs. That gap between price and momentum often signals fading buying pressure.

Read "The stock market is about to suffer a ‘snapback’ and will lose much of this year’s gains as ‘speculation is hitting extreme levels,’ BofA warns" on SmartNews: https://t.co/ZEEaZLRGbl

— G. Paco Gonzalez (@tforce7777) July 6, 2026

Three Technical Signals Point to Caution

BofA’s team built its case on three separate indicators, each pointing the same direction.

• A momentum and price divergence visible in the RSI reading.
• A TD Sequential “red 13” exhaustion signal that printed on June 1.
• An Elliott Wave fourth-wave entry near 7,334 on June 10.

A close below 7,334 would reinforce BofA’s (BOFA.NE) view that a corrective phase has started. The bank called this setup a classic “three-wave,” or ABC, correction pattern.

How Low Could the S&P 500 Fall

BofA’s downside targets vary by scenario. The bank’s base case points to roughly 7,122, while the worst case lands at 6,850. From Thursday’s close of 7,483.24, a drop to 6,850 works out to an 8.5% decline. BofA flagged 7,741 as a potential “bull trap” level on any bounce.

Market Breadth Is Quietly Weakening

Beneath the headline index, participation has narrowed. The equal-weight S&P 500 fell roughly 1% over the same stretch, while the cap-weighted index rallied about 14%. Only about 56% of S&P 500 stocks traded above their 200-day moving average, even as the index notched new highs.

Midterm Years Bring Bigger Swings

BofA’s note also flagged seasonal history. Going back to 1962, midterm election years have averaged a maximum intra-year drawdown near 17%, versus about 13% in non-midterm years. Between April and October of midterm years, the S&P 500 has averaged a peak-to-trough decline near 19%.

Chip Stocks Led the Recent Pullback

Semiconductor and memory names bore the brunt of last week’s selling. The Nasdaq 100 finished roughly 4% lower for the week. Broadcom (AVGO) dropped 10%, Nvidia (NVDA) fell 8%, and Intel (INTC) declined 7% over the same five sessions, based on Business Insider’s reporting.

Final Thoughts

BofA stresses that this call rests on technical signals, not a shift in earnings or economic outlook. The bank still expects a rebound once the correction runs its course, possibly into a year-end rally. For now, the S&P 500’s next moves around 7,334 and 7,741 look like the key levels worth watching.

Disclaimer:

The content shared by Meyka AI PTY LTD is solely for research and informational purposes. Meyka is not a financial advisory service, and the information provided should not be considered investment or trading advice