Key keywords: S&P 500 Three-Wave Correction, BofA Technical Analysis, Stephen Suttmeier, US Equity Market Outlook 2024, Stock Market Volatility, RSI Overbought Signal, VIX Historical Lows, Fed Interest Rate Cut Expectations Bank of America’s chief technical strategist Stephen Suttmeier issued a widely followed market report on May 22, 2024, warning that the S&P 500 index is set to go through a structured three-wave correction after notching 14 new all-time highs in the first five months of 2024. The benchmark US equity index has rallied 9.8% year-to-date as of mid-May, driven by better-than-expected earnings from AI-related large-cap tech stocks and persistent investor expectations for Federal Reserve interest rate cuts in the second half of the year. However, Suttmeier’s technical models indicate the months-long rally has pushed market sentiment and momentum into clearly unsustainable territory, creating the conditions for the predictable short-term pullback pattern. The three-wave correction Suttmeier projects will unfold in three distinct, observable phases. The first wave will see the S&P 500 drop 3% to 4% from its recent peak near 5310, testing initial support at the 5100 level as investors lock in profits on overextended tech positions that have led the 2024 rally. The second wave will be a temporary 2% to 3% bounce back to the 5200 level, fueled by dip-buying investors who incorrectly assume the initial pullback is the full extent of the market’s downward adjustment. The third and final wave will bring the index to a floor between 4950 and 5000, marking a total peak-to-trough decline of 6% to 7% before the broader multi-year bull market resumes its upward trajectory. Suttmeier’s thesis is backed by multiple reliable technical signals. The 14-day relative strength index (RSI) for the S&P 500 has stayed above 70, the widely accepted threshold for overbought conditions, for 12 consecutive trading days, a pattern that has preceded 80% of short-term corrections over the past two decades. The CBOE Volatility Index (VIX), known as the market’s “fear gauge”, has traded below 12 for three straight weeks, indicating investors are pricing in almost no downside risk, a classic contrarian signal for imminent volatility. Additionally, institutional and retail investor positioning surveys show 78% of market participants are holding net long positions in US equities, the highest level of bullish positioning since the end of 2021, just before the S&P 500 entered a 25% bear market. Crucially, Suttmeier emphasized that the projected three-wave correction is a healthy, temporary pullback rather than the start of a prolonged bear market. He maintained his year-end 2024 S&P 500 price target of 5500, noting that strong corporate earnings growth, cooling (albeit sticky) inflation, and eventual Fed rate cuts will provide sufficient fuel for the index to resume its uptrend once the correction runs its course over a 4 to 8 week window.