Tags: Investors | Bullish | Stock | Drop

Experts to CNBC: With Investors So Bullish, Stock Drop Must Loom

Monday, 13 February 2012 11:49 AM

Even though many investors appear convinced that stocks will go higher, now could be the perfect time for a market pullback, CNBC reports.

"While some market observers view high investor bullishness as an indicator that stocks will continue to advance, we believe lopsided sentiment is the Achilles’ heel for markets," Daniel Aaronson and Lee Markowitz, of Continental Capital Advisors in New York, wrote in a recent analysis.

"The four-month rally that started at the October 2011 interim low has led to a surge in investor bullishness and positioning," they continued, "which when combined with insurmountable sovereign debt problems, sets the backdrop for a major decline in equities."

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Uri Landesman, president of Platinum Partners hedge fund in New York, says that while the U.S. economic numbers are a little better and the disaster in Greece appears to be averted, he doesn’t see the economy continuing to grow.

"The risk is to the downside,” says Landesman.

“Bad economic data, bad earnings news, bad news from Europe could really take the market lower from these prices. Just to sustain the current levels you'd need a surfeit of good news."

Landesman sees the S&P 500 dropping perhaps 8 percent from its present level. He also thinks the index and could touch 1100 before rebounding and actually finishing the year stronger.

The Economic Times reports that stock markets have gone up by almost 15 percent since the beginning of this year, and are currently consolidating around their key resistance levels.

Others are also skeptical the rally will continue. Stocks may be up this year but investors should be wary, as a sound economy isn't pumping up share prices but rather Federal Reserve meddling is inflating the asset class, international investor Jim Rogers has warned.

Stocks will likely rise for the rest of 2012 but a correction will come and come hard, especially due to Federal Reserve influence.

"Things look better, but whether it is actually real or not is the question. I am worried about the U.S., especially in 2013 and 2014," Rogers tells Investment Week. "In the U.S., they are going to continue printing money and sending out good news to win votes this year," Rogers adds.

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Monday, 13 February 2012 11:49 AM
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