A significant buying opportunity could emerge on Wall Street.
Tony Dwyer of Canaccord Genuity believes a record rally will follow recent market volatility.
“We’re going to go from this heat of indigestion to a year-end opportunity,” the company’s chief market strategist told CNBC’s “Trading Nation” Tuesday. “We are not there yet. “
The Dow Jones and the S&P 500 posted their fourth consecutive negative session. The activity follows the sharp drop in indices on Monday. Right now, the Dow Jones is down 5% from its all-time high while the tech-rich S&P 500 and Nasdaq are down 4%.
“This is a multi-month correction in the broader market,” Dwyer said. “Considering the 2% decline from yesterday’s close, we are not overbought or oversold at this point.”
Dwyer, a long-term bull market that was put on a downturn watch last spring and lowered the market to neutral in April, lists stock exchanges on the fiscal cliff in Washington, the Federal Reserve’s decision on interest rates Wednesday and China. The debt crisis results from developer Evergrande as a logical negative catalyst in the short term.
“These are good excuses to take advantage of it,” he said.
In Tuesday’s Dwyer’s research note to investors, he indicated that the street would see a near-term rebound. However, he considers intermediate reading to be less favorable.
“There has already been a sharp rebound from Monday’s intraday low and the catalysts for a correction have yet to be resolved, so we expect a bit more upside and further weakness as the process of decline will start to add risk to the market. I will, ”Dyer wrote.
He expects the magnitude of the short-term pullback to be limited to a few percentage points.
In return, Dwyer plans to purchase financial, industrial, materials and energy products. Right now, Materials and Energy are firmly in correction territory, up more than 10% from their 52-week highs.
He argues that the enthusiasm for reopening economic trade is now largely over and that they will be the key to a record breaking market break in a few months.
“It’s more important to see… what the end-of-year opportunity is,” Dwyer said.
CNBC Christophe hayes contributed to this report.