By Michael Sincere
Trader Jeffrey Bierman says the market can stabilize if fund managers diversify into unloved, cheap sectors
The stock market could face a correction as early as this month – one that could last through the end of the year.
‘When gold outpaces the stock market this dramatically, it suggests the dollar is weak and equities are running on borrowed time.’
As Washington grapples with a government shutdown and markets remain surprisingly calm, one veteran market technician says investors shouldn’t get too comfortable.
Jeffrey Bierman, chief market technician at TheoTrade.com and an adjunct professor of finance at Loyola University Chicago, warns that the U.S. stock market could face a correction as early as this month – one that could last through the end of the year.
In this recent interview, edited for length and clarity, Bierman said he expects bitcoin’s next move to rattle equities and advised investors on what to do now to prepare.
MarketWatch: What’s your read on the current market environment?
Bierman: Investors have been spoiled by a year-long rally fueled largely by the Federal Reserve, which has pumped more money into markets over the past six months than in the previous four years. Liquidity keeps pushing prices higher, and on top of that, the AI story continues to dominate sentiment. The expectation is that AI is going to save the market, but I’ll take you to the end of the story – AI is going to create tremendous dislocations in jobs.
MarketWatch: What’s the most worrisome market warning right now?
Bierman: Gold (GC00) at all-time highs is not trivial. Its parabolic move suggests that inflation is still elevated to the point of being normalized, and that investors are shifting money into assets they see as safer stores of value. When gold outpaces the stock market this dramatically, it suggests the U.S. dollar DXY is weak and equities are running on borrowed time. The gold market is rarely wrong. The stock market often is.
MarketWatch: What’s your timeline for a potential market pullback, and what levels are you watching most closely?
Bierman: The market is poised to enter a prolonged adjustment period. Between October and December, I expect there will be efforts to keep it propped up, but the setup for October points to a standard 5% pullback. That said, investors shouldn’t mistake a 5% dip for a generational buying opportunity. If the S&P 500 SPX breaks below 6,530, it could trigger automatic-sell programs, leading to a brief bounce but not a real recovery. If we fall through 6,350, that would signal the end of the current uptrend that began in April. At that point, the market could face a steep slide back to 5,700, which is the next major area of support.
MarketWatch: How did you determine that 6,350 is such an important technical level for the S&P 500?
Bierman: I looked at the S&P 500’s ascending channel by connecting the series of higher highs and higher lows on the daily chart. I also marked the congestion zones – areas where prices have stalled or consolidated before. Together, those levels point to 6,350 as a critical support line. If the index breaks below that level, it would signal a breakdown of the channel and likely trigger a sharp move lower.
Bitcoin is vulnerable to a very, very steep correction to around $80,000, and potentially below $50,000,
MarketWatch: What’s your outlook for bitcoin right now? Do you see more upside, or are you expecting a correction?
Bierman: Bitcoin (BTCUSD) is setting up for a possible sharp and unrelenting correction, potentially a 30% drop from here. It’s already broken its upward trending channel. For the past month, bitcoin has moved inversely to the broader market, but that pattern is starting to realign. The renewed correlation signals that bitcoin is vulnerable to a very, very steep correction to around $80,000, and potentially below $50,000, according to my model. If bitcoin falls below $108,000, we could see a rapid meltdown. And beware: that event won’t likely stay contained in crypto. It could also drag the stock market down.
MarketWatch: Is there anything that could prevent a major selloff or stabilize the market?
Bierman: Yes, a selloff could be averted if money managers rotate into some of the market’s overlooked sectors and re-diversify their portfolios. Right now, many are heavily weighted in technology and financials. For example, if they reduced a 50% allocation in technology to 30% and shifted the difference into areas such as energy or consumer staples, it would help spread the risk and support market stability. These managers need to move their money into the unloved, depressed, cheap sectors to stabilize the market and lift those weightings. Otherwise, we could see a fast and furious unwind as margin deleveraging takes effect.
‘If you stay fully invested, consider rotating into some of the market’s overlooked sectors.’
MarketWatch: What should individual investors be doing to protect their portfolios?
Bierman: Never stay 100% long all the time. Always maintain a cross-asset hedge. If you’re long stocks, balance it with exposure to bonds, put options or even short positions in other assets. Proper diversification isn’t just holding a lot of stocks. It’s about managing correlation so your portfolio doesn’t move entirely in one direction. Investors also need to be realistic. Markets rise and fall. If you’re prepared for downturns, you won’t be caught off guard or panic when they come. What hurts investors most is complacency and a sense of invincibility. Accept that the market is a two-way business, and you’ll be better positioned to weather corrections.
MarketWatch: If investors want to stay fully invested, where should they look for opportunities right now?
Bierman: If you stay fully invested, consider rotating into some of the market’s overlooked sectors. Real-estate investment trusts (REITs) and consumer staples stocks have been beaten down, but could serve as a defensive hedge in a weakening economy.
‘The biggest emotion to fight is FOMO – the fear of missing out.’
MarketWatch: Have you ever seen a market like this before, or is what we’re seeing now truly unprecedented?
Bierman: No, I’ve never seen a market quite like this. Currently, a single sector, technology- dare I say seven technology megacap stocks – is responsible for nearly all the gains in the S&P 500. That’s very different from the dot-com era. Back then, the Fed wasn’t nearly as dovish, and it didn’t flood the market with liquidity the way it has in recent years.
MarketWatch: What hidden risks do you see in the market that investors might be overlooking?
Bierman: One hidden risk is record-high margin debt. Leverage in the market is now more than double what it was just a few years ago. This creates a dangerous multiplier effect. If forced deleveraging occurs, as we saw during the COVID-19 pandemic or the tariff selloff in 2018, losses can accelerate at an alarming pace. Investors could be caught off guard and unable to exit in time. The second risk is technical. If the slope of the S&P 500’s key moving averages shifts from flat to sharply downward, it could trigger algorithmic trading programs that intensify the selloff. Taken together, these risks could create serious systemic shocks to the market.
MarketWatch: What’s your biggest concern for the economy right now?
Bierman: We may be heading into a stagflation environment of rising prices in a slowing economy, and that’s a serious concern. No one wants to hear about stagflation, a term that is considered a dirty word. Markets have historically not tolerated stagflation very well. The Fed is playing it by ear, micromanaging the market rather than the broader economy. They didn’t need to cut rates even with weakening employment. Cutting rates in an inflationary environment is like throwing gasoline on a bonfire. It may have appeased Wall Street in the short term, but it’s only keeping the inflation bonfire burning.
MarketWatch: What emotion do you think investors need to guard against the most right now?
Bierman: The biggest emotion to fight is FOMO – the fear of missing out. Too many investors chase hot stocks without considering the fundamentals, which can leave their portfolios severely damaged. Valuation still matters. You might fool the market for a while, but not forever.
Michael Sincere is a MarketWatch contributor and the author of several books including “Understanding Stocks,” “Understanding Options,” and “Help Your Child Build Wealth.”
More: Why Nvidia, Broadcom and other highflying stocks are especially risky now
Also read: Big investors are afraid of the stock market, and the S&P 500’s path to 7,000 just got easier.
-Michael Sincere
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10-04-25 1040ET
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