Ron Insana: Why I'm Still Short Stocks

Friday, 08 Aug 2014 08:37 AM

By Dan Weil

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CNBC contributor Ron Insana announced last Thursday that he was shorting stocks, and he's not ready to abandon ship yet.

"I'm planning to stick with the position until some real signs of a market bottom take shape," he writes in a commentary for CNBC.

The S&P 500 has slipped 3.6 percent from its July 24 high. The Standard & Poor’s 500 Index fell 0.6 percent to 1,909.57 Thursday in New York, closing below its average price for the past 100 days for the first time since April. The Dow dropped 75.01 points, or 0.5 percent, to 16,368.33, close to its 200-day moving average.

Editor’s Note: Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now

"I still believe the market remains vulnerable to a decline of 5 to 10 percent or more. . . .
I believe we are in the early innings of a market correction, within the context of a secular bull market," Insana asserts. "As a consequence, I still own puts on the S&P 500, with a strike price of 1,850, expiring in September."

Stronger economic data have pushed forward expectations of a rate hike by the Federal Reserve, Insana notes. And concern about a possible Russian invasion of Ukraine also will weigh on stocks, he notes.

Insana plans to hold his short position for several weeks and then swoop in to buy stocks.

"Once conditions for an investible bottom emerge, I will redeploy capital. I will buy back my favorite stocks, at discounted prices, once they have corrected."

Meanwhile, Viren Chandrasoma, managing director of equity trading at Credit Suisse, tells The Wall Street Journal that investors were naturally jolted by the market's drop after weeks of low volatility. But he doesn't think the correction signals big trouble.

"Every time you see some selling, the market bounces right back with a surge of buying," Chandrasoma explains. "Plenty of people are looking to employ cash at these lower levels."

Editor’s Note: Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now

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