The SPY and VOO ETF stocks rose modestly after Donald Trump delivered his speech at the World Economic Forum. In his speech, he ruled out an invasion and advocated for negotiations. Still, there is a risk that the S&P 500 Index may be on the verge of a big dive soon.
Tom Lee Believes that the S&P 500 Index Could Crash Soon
In an interview, Tom Lee, the founder of FundStrat and the Chairman of BitMine, warned that the stock market may crash soon. He identified a few catalysts, including the upcoming Federal Reserve transition, the repricing of the AI industry as evidenced by the NVIDIA stock crash, and policy challenges.
Sharp declines in the S&P 500 Index and its top ETFs like VOO and SPY are common. For example, they all sank into a bear market in April last year when Trump launched his trade war. Before that, top indices plunged in 2022 as the Federal Reserve hiked interest rates.
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A sharp decline in the stock market would come as many Wall Street analysts are highly bullish. Oppenheimer predicted that the index would jump to $8,100 this year, while Deutsche Bank sees it rising to $8,000. Goldman Sachs, JPMorgan, Barclays, and Morgan Stanley are also highly bullish.
Tom Lee also believes that the S&P 500 Index will end the year higher, with his target being at $7,700. He expects the index to retreat and then pump higher, helped by key catalysts like strong earnings growth, Federal Reserve cuts, and the impact of the Big Beautiful Bill. Also, analysts anticipate that the ongoing AI boom will continue this year.
SPY and VOO Stocks May Dive Before Rebounding
The weekly chart shows that the VOO stock is flashing risky chart patterns that may lead to a deeper dive. It has formed a rising wedge chart pattern, which is made up of two ascending and converging trendlines. These two lines are now nearing their confluence, meaning that a crash may be near.
Also, the ETF remains much higher than the 100-week and 50-week Exponential Moving Averages (EMA). That is a sign that it may go through mean reversion, a situation where an asset falls to align with the historical averages.
Additionally, the ETF has formed a bearish divergence pattern. This pattern forms when the RSI index and other oscillators retreat when the asset is rising.
As the chart shows, the two lines of Percentage Price Oscillator (PPO) have made a bearish crossover and is pointing downwards. Also, the Relative Strength Index has pointed downwards.
Therefore, there is a likelihood that the SPY and VOO stocks will retreat in the near term and then rebound later this year.
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