If the market needs a wall of worry to climb, it's got one.
While the stock market celebrates its new zenith and the bull
run's fourth anniversary, bearish investment strategists are
to leave the party as the latecomers arrive.
Their opinions contradict current stock market
price-and-volume action, which shows the market is in a confirmed
uptrend, as noted in IBD's Market Pulse.
Overly optimistic investor sentiment, high levels of corporate
insider selling and major leaders breaking down and a handful of
others suggests the market is approaching a top, says Marc Faber,
editor of the "Gloom Boom & Doom Report," based in Hong Kong.
Among leaders running into trouble recently has been3D Systems (
). Faber also pointed toAbercrombie & Fitch (
) andDillard's (
The Investors Intelligence survey of investment newsletters
showed the bull-to-bear ratio registered at 2.19 last week. It
could be worse. It tends to register at 1.0 at bottoms and 3.0 at
tops, according to Ed Yardeni of
Investors poured $33.05 billion into U.S. stock funds so far
this year, a dramatic reversal from the year-ago period when they
pulled out $3.04 billion, according to EPFR Global.
Corporate insiders are selling six times more than they are
buying, according to the Vickers Weekly Insider report. The
current sell-buy ratio of 6.03 over the past eight week far
exceeds the 2.5 threshold indicative of a weakening market, the
The Federal Reserve and central banks around the world juiced
the stock markets by lowering interest rates and printing money
the past four years, but the growth rate of their balance sheets
has been slowing down, Faber contends.
"In an era of capital superabundance, central banks will need
to print money at an ever-accelerating rate to keep all assets
moving up in price," Faber wrote in his March commentary. "The
moment there is a slowdown in the rate of money printing, some
assets will fail to appreciate or more likely decline in
In anticipation of stock market bubble bust, he's selling
stocks and buying gold as a safe-haven asset or "as insurance
against a systemic crisis and war, and against unlimited
additional money printing," Faber wrote.
The S&P 500 is forming a bearish "megaphone pattern" with
market peaks from 2000 and 2007 presenting price resistance,
according to Harry Dent, founder of HS Dent, a stock market and
economic research firm in Tampa, Fla.
"We expect the markets to peak this week and then see a 7% to
10% correction, then a final rally into the summer that will
likely not exceed 1,600 on the S&P 500," he wrote in a client
The stock market on the last legs of forming 13-year top, says
David Hunter, chief market strategist at KCCI, Ltd., a brokerage
firming Jersey City, N.J.
"I expect a big sell-off to follow soon. Initially, I think we
could see a 15% drop but ultimately I am expecting a decline well
in excess of 50%," Hunter said in an email. "I believe the global
economy is continuing to move toward a recession, one that will
ultimately be very deep due to the enormous leverage in the
Less Gloom, Less Doom
Alec Young, global equity strategist at S&P Capital IQ,
recommends lightening up on stocks with the expectation of a 3%
to 5% dip and then buying back at lower prices.
"(The S&P 500) has been on quite a run and we think it's
closing in on the time for the market to recharge its batteries,"
he wrote in a note. "Many sentiment indicators are now showing
high levels of optimism, a warning sign, in our view."
He added: "While the pace of gains has not surprisingly slowed
since January, the trend remains firmly higher as investors
discount previously underappreciated bullish drivers. These
include consistently better-than-expected U.S. economic data,
which, we think is fueling confidence that companies will
continue to exceed consensus earnings per share expectations,
despite sluggish guidance.
"In addition, while withdrawal pains from stimulus are likely
eventually, Federal Reserve Chairman (Ben) Bernanke has made
clear that QE (quantitative easing) tapering isn't likely in the
forecast horizon. That coupled with abundant liquidity from the
European Central Bank, Bank of Japan and Bank of England and
still reasonable valuations make a near-term challenge of the
S&P's record high likely."
Whether the market is fully valued or overvalued, it could get
even more overvalued, says Ben Woodward, chief investment officer
at Black Diamond Investment Partners in Atlanta, Ga.
"Remember that Alan Greenspan uttered the words 'irrational
exuberance' a full four years before the tech bubble bursting,"
Woodward said in an email. "To quote Lord Keynes, 'the market can
stay irrational longer than you can stay solvent.'"
The market has just broken out of a 13-year-long,
cup-with-handle base that digested the tech bubble, the housing
bubble and the 2008 financial meltdown and has just started a
fresh bull market, said Damon Vickers, chief investment officer
of Damon Vickers + Co. in Seattle.
"Price has broken through all of the resistance that has kept
market range bound for 13 years," Vickers said. "Price is the
principal driver of assets and price tells us when to get in --
not our opinions, not our biases."
The fundamental picture still appears ugly when bull markets
start and there are many reasons to be skeptical, but price
action prevails over all other variables, Vickers contends.
"At the beginning of bull markets, the fundamentals are not
always in place," he said. Vickers said he will know he's wrong
when a stock falls 7% or 8% below his purchase price.
stock market today
, SPDR S&P 500 (
), climbed 0.5% to 155.47. It's vaulted 131% from its March 6,
2009, bear market low of 67.10.
PowerShares QQQ (
), tracking the 100 largest nonfinancial stocks on the Nasdaq,
picked up 0.2% to 68.83. It's rallied 174% from its trough in
November 2008. It eclipsed its 2007 peak in February 2011.
SPDR Dow Jones Industrial Average (DIA) added 0.44% to 143.77.
It's climbed 122% from its 2009 bear market bottom.
IShares MSCI EAFE Index (EFA), tracking developed foreign
markets, was up 0.22% at 59.38. It's only gained 88% from its
bear market bottom and it's 33% below its 2007 high.
IShares MSCI Emerging Markets Index (EEM) rose 1% to 44.194.
It's climbed 142% from its bear market low, but it hasn't
recovered its prebear market peak either. It's 21% below its 2007
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