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Brad Lamensdorf: Many Stocks in Bear Market as Correction Looms

Brad Lamensdorf: Many Stocks in Bear Market as Correction Looms
(Stock Photo Secrets)

Tuesday, 08 August 2017 08:03 AM

Brad Lamensdorf, the manager of AdvisorShares Ranger Equity Bear ETF (HDGE), says warning signs of a stock-market correction are everywhere.

"As the indexes continue to produce a series of higher highs, subsurface conditions are painting an entirely different picture," Lamensdorf said in his market timing report.

"The market capitalized indexes are dominated by names such as Amazon, Microsoft and Johnson and Johnson. The good performance of these large companies is masking the fact that many stocks, including REITS and those in the retail sector, have already entered bear market territory," he said.

"An alarming percentage" of NYSE and Nasdaq stocks are hitting 52-week lows even though the S&P 500 has marked several new highs.

The S&P has gained about 11 percent this year. However, the run-up has also sparked concerns about stretched valuations. The S&P is trading at 18 times expected earnings, compared to its 10-year average of 14, according to Thomson Reuters Datastream.

"Recently there were more than 340 securities that sank to 52-week lows, the second highest level going back as far as 1965," Lamensdorf said. "Similar spikes occurred in 1973 and 1999, both directly preceding significant corrections," he warned.

A "correction" is commonly defined as a temporary drop of at least 10 percent adjust for an overvaluation.

“Serious market corrections do not occur out of the blue. Indicators help investors identify when corrections are long in the tooth and rallies are beginning to wane. Presently the indicators are suggesting a top. We remain 50% short,”

“Over the last year fewer and fewer stocks have participated in the market rally,” he explained.

He explained a unique indicator that quantifies the narrowing of stocks participating in a rally. The indicator went back to 1995 and analyzed closes on the Russell 2000 that were at
three-year highs while less than 5% of the stocks were at 52-week highs, indicating sell signals.

"There have been five sell signals over the last 20 years, and one of them is occurring now. The 1996 signal was followed by a year-long flat market. The 2000 and 2007 signals identified incredibly rough bear markets, and the 2015 signal coincided with a 20% Russell correction," he warned.

To be sure, ratings agency Fitch this week lifted its outlook for the world economy for this year and next, Reuters said.

"Data continue to suggest a synchronized global expansion across both advanced and emerging market economies. Spill-overs from the rebound in emerging market demand are reflected in the fastest growth in world trade since 2010," said Fitch chief economist Brian Coulton.

However, many other respected investment gurus would welcome a temporary stock-market dip.

CNBC's Larry Kudlow advises savvy investors to expect a slight dip in the current bull market and be prepared to buy more shares if stocks fall up to 10 percent.

“Stocks, for the long run, are a great bet in America, a great bet in our free-market capitalism. You don’t want to sell now,” the CNBC senior contributor told "Big John & Ramblin' Ray" on WLS (890AM) in Chicago.

“I probably would love to see a 5-to-10 percent correction in the not-too-distant future,” the Newsmax Finance Insider explained, “because that would be an even better buying opportunity.”

Meanwhile, Leon Cooperman says he isn’t afraid of the market correction that some others insist is coming. "The market is fully valued, but it's not overvalued," the head of Omega Advisors told CNBC.

Cooperman said if the market does suffer a sudden tumble, he would buy banks including Bank of America, Citigroup and JPMorgan Chase.

(Newsmax wires services contributed to this report).

© 2018 Newsmax Finance. All rights reserved.

   
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Brad Lamensdorf, the portfolio manager of the short-only Ranger Equity Bear ETF, says warning signs of a stock-market correction are everywhere.
stocks, correction, market, investors, bear, lamensdorf
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2017-03-08
Tuesday, 08 August 2017 08:03 AM
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