• Ron William, chief investment officer at RW Advisory, told CNBC's "Squawk Box Europe" the 5,200 level for the S&P 500 will "decide whether this bounce-back holds or whether we break down lower."
• U.S. markets are seeing a "bull trap squeeze, where there's a lot of leveraged, bullish views on [the] back of a consensus soft landing view, which ultimately is now make or break."

The S&P 500 is facing a key test level as the consensus view of a soft landing for the U.S. economy reaches a "make or break" point, according to one strategist.

Ron William, chief investment officer at RW Advisory, told CNBC's "Squawk Box Europe" the 5,200 mark will "decide whether this bounce-back holds or whether we break down lower."

U.S. stocks have whipsawed since last Friday, with a sharp sell-off followed by a bounce-back on Thursday. This led the S&P 500 to its strongest session since 2022, leaving it around the 5,310 level.

Two of the biggest drivers of the volatility have been Japanese monetary policy, and uncertainty about the health of the U.S. economy leading to questions of whether a recession is in the cards — with investors first spooked and then reassured by two sets of labor market data.

"Strategically, a top is in, but that will likely play out for the remainder of the year into 2025. That's our base case at RW Advisory," William said.

"Our thesis has been a behavioral inflection point since the start of the year, which is now reversed. But essentially what that means is a bull trap squeeze, where there's a lot of leveraged, bullish views on [the] back of a consensus soft landing view, which ultimately is now make or break."

"Certainly we could get an in excess of 10% correction into the 15% mark or more," he said, when referring to 5,200 as the key level to watch.

William described a bull trap as a selling point in which bullish consensus is proven wrong. In broad terms it can refer to a situation in which investors suffer losses on long positions after acting on a buy signal.

"[A bull trap] can be quite dramatic, and that's certainly what we were looking for over the last tactical period, because the markets were under pressure — a triple whammy headwind of extreme momentum, rotation fragility and cycle asymmetric risk," William said.

When asked about the volatility in April — when the market sold off, bounced, sold and then continued to gain — William said: "Time has passed and the markets became more overextended in terms of the original three factors ... the excessive momentum, but also the fact that we had ongoing signs of rotation fragility, and back in Q1 tech seemed to look even more frothy."

"Then we had that fast rotation into value, which wasn't viable or sustainable. And so in a way, it was the last trigger to take place. And we've since had a perfect storm of other factors that have triggered the market down."

Correction: This article has been updated with the correct spelling of Ron William's name.