I See a Big Correction Coming Early in 2021 - Here's Why
In a year literally plagued with bad news and uncertainties about public health, social unrest, and a political crisis, the stock market posted robust returns. This doesn't surprise me -- the stock market has a long history of defying expectations, and 2020 was a flagship year for doing just that.
I expect 2021 to be different, and assuredly more volatile, in my view.
The stock market staged a strong rally off the spring lows, with frequent stories of 100+% gains and more recent news about explosive returns in cryptocurrency. From an investment standpoint, the strength across many asset classes has led to a surge in “FOMO,” or fear of missing out on returns.
Many investors are rushing into the markets, pushing sentiment from pessimistic in the spring to optimistic today. Investors borrowed a record $722.1 billion on margin through November 2020, a signal that risk-taking may be approaching a crescendo.
Optimism and overt risk-taking combined have been ominous for markets, as historically they have tended to result in corrections, pullbacks, and bouts of volatility (see 2000 and 2008 for examples). I'm also seeing signs of too much optimism in the retail brokerage market, with individual investors opening more than 10 million new brokerage accounts in 2020 – a record. The Wall Street Journal also reported that the online trading platform Robinhood saw 500,000 new downloads in December, as well as upticks in volume on brokerages like TD Ameritrade and E*Trade.
If history serves as any indication, I think this rush of investor enthusiasm ends with a sharp, sudden, and probably pretty scary correction of -10% to -20%. I'm spending the next few weeks getting cash at the ready.
SPY in upward trend: price may ascend as a result of having broken its lower Bollinger Band on June 10, 2026
SPY may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options. In of 36 cases where SPY's price broke its lower Bollinger Band, its price rose further in the following month. The odds of a continued upward trend are .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Momentum Indicator moved above the 0 level on July 02, 2026. You may want to consider a long position or call options on SPY as a result. In of 73 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
SPY moved above its 50-day moving average on June 29, 2026 date and that indicates a change from a downward trend to an upward trend.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where SPY advanced for three days, in of 366 cases, the price rose further within the following month. The odds of a continued upward trend are .
Bearish Trend Analysis
The 10-day RSI Indicator for SPY moved out of overbought territory on June 03, 2026. This could be a bearish sign for the stock. Traders may want to consider selling the stock or buying put options. Tickeron's A.I.dvisor looked at 45 similar instances where the indicator moved out of overbought territory. In of the 45 cases, the stock moved lower in the following days. This puts the odds of a move lower at .
The Stochastic Oscillator has been in the overbought zone for 1 day. Expect a price pull-back in the near future.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where SPY declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for SPY entered a downward trend on July 02, 2026. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
Notable companies
Industry description
Market Cap
High and low price notable news
Volume
Fundamental Analysis Ratings
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
Advertisement
General Information
Category LargeBlend
Advertisement