EXCLUSIVE: Piper Sandler's Craig Johnson Is Calling For A 'Hop, A Drop And A Pop' In Markets This Year — Here's How It's Going To Play Out

Zinger Key Points
  • The broader markets are in what Piper Sandler's Craig Johnson calls a "hop" phase. A "drop" and a "pop" are coming.
  • Johnson ultimately expects the S&P 500 to end the year around 4,625.

Craig Johnson, chief market technician at Piper Sandler, says all signs are pointing to a bullish end to 2023 and he has even laid out how the market is going to get there.

What To Know: The market has run higher to start the year to the surprise of most, but Johnson believes the rally still has legs. Although he expects a pullback to eventually come, the Piper Sandler technician said he thinks the overall trend is higher.

There is a lot of nervousness in the market as several indices are up against support lines, he said Wednesday on Benzinga's "PreMarket Prep." But despite the broader angst, Johnson expects a bounce.

"The reason I think it will hold is that we've got major downtrend reversals not only in the Dow, the S&P, the Russell, the Nasdaq ... we've also seen on most of the popular averages, 50-day moving averages crossing back above 200-day moving averages, which reaffirms to us that the intermediate term trend for this market should be higher."

His outlook for the year can be summarized by expectations for a "hop, a drop and a pop." The "hop" stage still has another 5% to 7% to go, he said, adding that he expects the S&P 500 to climb to 4,200 to 4,300 before investors ses a "drop."

See Also: Nasdaq, S&P Futures Slide As Bond Yields Stay Above 4%: Economic Signals Ominous But Don't Panic Yet, Says Analyst

The drop is likely to be steep. Johnson is calling for a 10% pullback from the aforementioned levels, which would put the S&P 500 around 3,800 in a few months' time. 

He expects the drop to be spurred by the Federal Reserve. The Fed is likely to raise rates another 0.25% to 0.5%, which should be followed by a pullback in markets, he said.

"And then, I think into year end, we've got a pretty solid pop coming and I think that's gonna push us to 4,625," Johnson said.

Most macro firms are anticipating a recession in the second half of 2023, he said. 

"We know from looking back at history that when you are told you're in a recession, it always gets backdated 7.6 months ... Every time, except for one, the market bottomed while you were in that recession window. That's where the pop is going to come from," Johnson said.

Check This Out: 10 Price Action Patterns To Master


See the full interview below: 

SPY Price Action: The SPDR S&P 500 SPY gained 0.78% Thursday, closing at $397.81, according to Benzinga Pro.

Photo: Gino Crescoli from Pixabay.

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Posted In: Analyst ColorLong IdeasTop StoriesExclusivesAnalyst RatingsTrading IdeasInterviewCraig JohnsonExpert IdeasPiper SandlerPreMarket Prep
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