March 30 (Bloomberg) -- Investors should sell U.S. stocks following the steepest rally since the 1930s because earnings are likely to keep weakening, according to Morgan Stanley. The Standard & Poorâs 500 Index advanced 21 percent in the past 14 trading days, the most since 1938, according to data compiled by New York-based S&P analyst Howard Silverblatt. It closed at 815.94 last week, rebounding from the 12-year low of 676.53 reached on March 9. âWe cannot see large upside for the S&P 500 above the 825- 850 level,â Morgan Stanley U.S. equity strategist Jason Todd wrote in a report yesterday. âIn the rush to buy a cyclical recovery, it seems earnings or valuation no longer matters. We would be comfortable with this view if the earnings trough was closer, but it is not.â The S&P 500 lost 3.5 percent, the most since March 5, to 787.53 today as the Obama administration warned that some banks will need more government aid and that General Motors Corp. and Chrysler LLC have one last chance to restructure. U.S. companies will start reporting results for the first quarter in the next two weeks. Analysts, who have overestimated profits for every period since the third quarter of 2007, expect S&P 500 earnings to drop 36 percent on average, paced by retailers, automakers and semiconductor suppliers, according to data compiled by Bloomberg. Theyâre forecasting S&P 500 companies wonât halt the longest streak of declining earnings since at least 1947 until the fourth quarter. ... Todd said investors should consider âcollaringâ their positions by selling call options and buying puts on the S&P 500, thereby protecting against declines and profiting from the forecast that the gauge wonât advance much further. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZ6I80AP7Hu4
Coincedently three banks, i.e. Goldman, Morgan Stanley and Citibank called the rally to be faded. LOL !
stock_trad3r says not to sell. I think we should not listen to Morgan Stanley and, instead, listen to stock_trad3r. Sincerely, stock_trad3r's biggest fan
LEGS: I think we have legs to 850 on the June futures. 850 could be a very good place to fade; if not I'm looking at 875.50 area. Best of luck today!