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Tags: Elder | stock | gold | market

Alexander Elder: Stock Party 'About to Get Busted Up'

By    |   Wednesday, 18 June 2014 03:11 PM

While the S&P 500 index has posted yet another record-high close, renowned stock trader and author Alexander Elder thinks the five-year bull market is running out of gas.

"This market is running on hot air and inertia," he tells MarketWatch. "The party is still going on, but there are police lights flashing down the block, and the party is about to get busted up. The longer it goes, the nastier it will fall."

The S&P 500, which closed at a new-record high 1,956.98 Wednesday, has soared more than 190 percent from its March 2009 low.

Editor's Note:
5 Signs Stock Market Will Collapse in 2013

The dwindling number of stocks registering new peaks has helped turn Elder bearish. "In 2013, over 2,500 stocks had made a new [52-week] high on a weekly chart," he explains. "In 2014, it's barely 500. In other words, the market has been making new highs but there is no bullish leadership."

The market climate now reminds Elder of 2007 before stocks peaked. "We had this long period of sluggish volatility, the market was going up, and everyone was happy," he notes. Then came the plunge.

Elder recommends gold and gold miner stocks as an alternative.

"When the market starts going down, it won't be selective. The only things that will go up will be those not related to the market such as gold and gold stocks," he argues.

"Use the contrarian approach. If you look at performance, last year the two worst-performing groups were gold and silver. These are the two groups I'll be buying. Often, the best becomes the worst and the worst becomes the best. And that is how the markets have worked for over a century."

Jack Ablin, chief investment officer at BMO Private Bank, doesn't share Elder's bearishness on stocks.

"Even though we have these issues [Iraq and uncertain economic growth] and the market is relatively expensive, we have an enormous amount of liquidity flowing into the market," he tells Yahoo.

That liquidity, coming from central banks and private financial institutions, will boost stocks, Ablin notes.

Editor's Note: 5 Signs Stock Market Will Collapse in 2013

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StreetTalk
While the S&P 500 index hovers within 1 percent of its record high, renowned stock trader and author Alexander Elder thinks the five-year-old bull market is running out of gas.
Elder, stock, gold, market
357
2014-11-18
Wednesday, 18 June 2014 03:11 PM
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