Bank of America technical analyst predicts that the S&P 500 index will experience a "three-wave correction" and may fall to 6,850 points.

The head of technical analysis research at Bank of America Merrill Lynch said that investors must hedge against further increases in the S&P 500 index and prepare for a possible "three-wave correction" in the coming months. Bank of America's Paul Ciana wrote in a research report on Thursday that the recent rise in the S&P 500 index has been strong, up nearly 17% since the March low, but has shown signs of exhaustion since reaching a recent high on June 2. He said that the S&P 500 index could drop to 6,850 points, a decrease of about 7.6% from current levels.