As economic uncertainty persists, primarily due to trade wars, an expert is warning that financial markets are likely to see continued losses and could enter bear territory within weeks.
Chris Vermeulen, Chief Market Strategist at The Technical Trader, cautioned that the S&P 500 and Nasdaq are showing signs of weakness, driven largely by underperforming technology stocks and the Magnificent Seven, he said in an interview with David Lin, published on March 30.
He acknowledged that the Magnificent Seven stocks have long supported market gains but are faltering, which could have serious implications for the broader sector.
Picks for you
As a recap, the stock market ended the March 28 session in the red, with the benchmark S&P 500 shedding about $1 trillion in a single day. Meanwhile, the index’s technology stocks formed their first “death cross” over three years, a bearish signal suggesting further downside ahead.
Despite these losses, Vermeulen stressed that the bear market is yet to start since such a downside is typically defined by a 20% decline from recent highs. However, he warned that conditions indicate an even deeper drop may be imminent in the coming weeks.
According to Vermeulen, the Magnificent Seven will be the driving force behind the market downturn. Their outsized influence could accelerate losses and amplify volatility.
“I think we are in striking distance in the next more or less week or two to enter bear market territory. <…> The magnificent seven, all the big powerhouses and pockets of stockss, have bearish price action that points to much lower pricing. And that will pull the Nasdaq, the SP 500 down and create panic among investors,” he said.
S&P 500 and Nasdaq next targets
Using technical analysis tools like Fibonacci extensions, Vermeulen identified a downside target for the S&P 500 at approximately 5,183. This level would represent a 15% drop from its peak and an additional 7.5% decline from current levels over the next one to two weeks.
He predicted that the Nasdaq could see an even steeper decline, potentially falling nearly 11% from its current position within the same timeframe, bringing its total drop from recent highs to 22%.
Looking ahead, he sees the coming weeks as a pivotal moment, expecting markets to hit key downside targets before finding support and staging a multi-month rebound.
However, he remains skeptical of a full recovery, believing the market has already peaked and is unlikely to reach new highs.
Beyond this temporary bounce, Vermeulen anticipates an extended downturn that could signal the start of a financial crisis. He sees growing risks of widespread investor panic with bearish signals emerging across major stocks and sectors.
Preserving wealth
For long-term investors focused on wealth preservation, Vermeulen advised holding cash in the upcoming downturn to protect capital. However, he cautioned against trusting banks with money due to the fragility of the banking system, instead suggesting gold as a safer alternative.
“I think there are a couple of ways you can play it. One of them is to step aside; there’s nothing wrong with not being in the market. Sometimes, cash is one of the best and most powerful plays. <….> If you move to cash, you probably don’t want to keep it all in a bank,” he added.
The expert also highlighted potential opportunities during downturns, noting that assets like the U.S. dollar index and bonds tend to rise when markets fall.
With another sharp market drop on the horizon, Vermeulen foresees a potential bear market within weeks, followed by a brief rebound—and possibly a broader financial crisis.
Watch full interview below:
Featured image via Shutterstock
