The analyst known as the "Wall Street Magus" warned investors not to buy into the stock market dip now because there will be a wave of selling in the coming weeks before the market truly bottoms out.

Tom Lee, head of research at Fundstrat and one of the most bullish stock forecasters this year, has issued a warning to investors looking for opportunities in the U.S. stock sell-off. Stocks have plunged this week, with the S&P 500 falling for four straight days, driven by a sizzling March inflation report, escalating tensions in the Middle East and a delay in an expected Federal Reserve rate cut.

But speculative investors should not rush into the market just yet, Lee said, noting that the VIX, a gauge of market volatility, is surging. He warned that rising volatility typically triggers investor selling, which could lead to short-term pressure on stocks.

“While we generally like to buy dips, as we said earlier this week, the spike in the VIX suggests we must buy dips later,” Lee said in a video sent to clients Thursday.

Lee said that since the market will bottom out later, buying opportunities may come soon. This is mainly because positive catalysts for the stock market are still in play, such as strong corporate earnings growth. According to FactSet estimates, the S&P 500 (SPX) is expected to report earnings growth of more than 7% in the first quarter.

The Federal Reserve still appears likely to cut interest rates at some point this year, even if it may come later than investors expect. Markets are currently pricing in one or two rate cuts by December, according to the CME Group’s FedWatch tool.

Lee predicts that if the conflict in the Middle East does not escalate further, market volatility eases and investors show signs of slowing their selling, U.S. stocks could bottom out next month or even earlier.

“I think this pullback will ultimately provide a good entry opportunity, and all the factors supporting the stock market are still there,” Lee said.

Lee predicted that the S&P 500 could reach 5,200 by the end of the year, but noted that in a best-case scenario, the index could reach 5,500 or higher. His price target for the S&P 500 (SPX) last year was just over 30 points away from the index's final price.

Chris Vermeulen, CIO of Technical Traders, was less optimistic, saying that while the U.S. stock market has been in a long bull market, there are signs that the bull market will eventually run out of steam and inevitably enter a bear market and a difficult "reset."

The investment chief pointed to recent gains in defensive assets such as precious metals, energy stocks and industrial shares, which Vermeulen said typically do well in the late stages of a bull market.

He predicted that U.S. stocks could be heading for another bear market similar to the ones that followed the dot-com bubble and the 2008 financial crisis, which he warned could ultimately lead to painful losses for investors, with their wealth shrinking by 30%-50% in the next year.

“I think the market is entering an important top and more or less a financial reset,” Vermeulen said Tuesday. “It will be short-lived and painful. But the market does need to pull back and correct periodically in order to continue to rise.”

Such a reset could also be accompanied by a recession, Vermeulen said, with industrial stocks in particular showing signs of a slowdown. While the sector has performed well in recent months, industrial buyers typically upgrade equipment at the end of an economic growth cycle because there is a “huge lag” between a business slowdown and new machine orders.

“They don’t realize we’re coming to the end of a growth cycle,” Vermeulen said of U.S. companies. “Industrial stocks have continued to rise strongly, but eventually they will start to slow.”

Investors remain concerned about a potential recession, especially as inflation remains high and the Federal Reserve appears ready to keep interest rates high for longer. The New York Fed's latest estimate puts the probability of a U.S. recession at 58% by March next year.$BTC $ETH $SOL