According to the latest analysis from JPMorgan, the S&P 500 is due for a significant downturn as it remains overvalued.

Despite the current positive momentum, JPM strategists have consistently warned investors of the potential for a correction due to various macro and earnings risks.

“We have viewed the 4100-4200 as a key resistance zone and an area we did not expect the market to penetrate in a lasting or meaningful way in the first half of 2023,” the analysts said in a client note.

They predict that the mid-term support for the index will be around 3760 before it drops to key levels near 3500 by early summer.

We believe that will ultimately set a cycle bottom, especially if that weak performance is accompanied by impulsive yield curve steepening. Until that setup emerges, we suggest maintaining a bearish bias and staying defensively positioned,” the analysts added.

On the other hand, the analysts also pointed out the resistance levels to watch out for, including 4115, 4200, and 4239.

“We would need to see a sustained break above 4200 and a clear rotation to cyclical leadership not only in the US but across global markets to make us rethink our 1H23 outlook. Not only has the market respected our favored resistance and triggered systematic sell signals to bolster our stance, but the rotation away from cyclicals and recent slide in markets like copper and semiconductor equity prices make us even more confident in the outlook,” the analysts concluded.

As of the moment, the S&P 500 has posted a 5.65% year-to-date gain.