Bank of America says stocks could face a short-term correction of up to 12% before the bull rally continues this summer.

• The stock market may be on the verge of a correction of up to 12%, says Bank of America.

• The bank's stock market roadmap includes declines before the summer bull rally.

• "We can't rule out an April-May pause before a June-August summer rebound," Bank of America said.

According to Bank of America, the US stock market has been on a tear so far this year, with the 14th highest first-quarter return ever, soaring about 10%.

But technical strategist Stephen Suttmeier said in a report Tuesday that the stock market could take a pause in the next two months before the summer bull rally, given that 2024 is an aggregate election year.

Suttmeier emphasized that, historically, April and May of an Aggregate Election year are weak months for the stock market, with the S&P 500 flat in April and down an average of 1.1% in May.

"Given this uninspiring seasonality, we cannot rule out a pause in April-May before the summer rebound in June-August," Suttmeier said.

According to YCharts, the S&P 500 hasn't seen a 2% movement in 59 days, so the correction is probably overdue.

If stocks do sell off, Suttmeier emphasized the following support levels for the S&P 500 to watch: 4800 and 4600, which are key breakout levels for December.

If the S&P 500 were to fall to 4600, that would be a potential decline of 12% from where it was before, which would be a common sell-off for investors.

"The breakout points in the 4,800 and 4,600 area provide great support for the rest of 2024," Suttmeier said.

However, Suttmeier does not think that a move back to the 4,600 area for the S&P 500 would mean the end of the bullish rebound, and he has a long-term technical price target of 6,150, which gives him a potential upside of 181 TP3T from where it was a few moments ago.

"A breakout above the 4,800-point area in January 竝 not excluding the possibility of 6,150 points 竝 coincides with the potential for a catch-up trade into the 2024 cycle of the secular bull market of totalitarianism," Suttmeier said.

Depending on how far ahead the stock market rebound is from October 2022, the bull market rebound could be even higher.

Suttmeier says the S&P 500 has rebounded 47% from its October 2022 low, which is more than half the median of the stock market's rebound from the big low of 106%, which lasted about four years.This suggests the S&P 500 could eventually reach 7,000 by the end of 2026, according to Suttmeier. The potential upside is 34%.

Therefore, although there may be a near-term correction in the stock market, this should be considered a buying opportunity as the bull market is still intact.

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