U.S. Stocks at Risk for 20 Percent Decline

Discussion in 'Wall St. News' started by WallStWhizKid, Sep 8, 2009.

  1. http://www.bloomberg.com/apps/news?pid=20603037&sid=ak.1o0dVxWHo

    Sept. 8 (Bloomberg) -- The U.S. stocks rally is “maturing” and the risk of a 20 percent retreat in the Standard & Poor’s 500 Index increased after sellers became more aggressive than buyers, Bank of America said.

    Mary Ann Bartels, an analyst at Bank of America, said her volume intensity model, used to capture the market’s money flows, showed investor buying peaked last week and selling gained strength. That’s signaling the 50 percent rally in the S&P 500 from a 12-year low on March 9 may be near an end, she said. Technical analysts study chart patterns to predict prices.

    Selling pressure was the third of five indicators watched by Bartels to signal increased probability of a 15 percent to 20 percent “correction” in the benchmark for American equity, she said. Two others were triggered last month when China’s Shanghai Composite Index began a 16 percent slump and Investors Intelligence said bearish sentiment among newsletter writers shrank to less than 20 percent.

    “These are all signs of a maturing rally,” Bartels, who ranked second among analysts who study price charts in Institutional Investor magazine’s most recent survey, wrote in a note published today. “The risk of a deeper correction is increasing.”

    The two indicators that continue to support the equities rally are technology share outperformance and an increasing number of stocks trading above their 200-day average price, Bartels wrote. A measure of technology shares in the S&P 500 has jumped 39 percent this year, more than the 13 percent gain for the broader index. The percentage of companies listed on the New York Stock Exchange trading above their 200-day moving average rose to 91 percent in August, the highest in five years.

    “The S&P 500 remains in an uptrend, but the data challenges how long this can be maintained,” Bartels said.
  2. Bank of America said.


    Thank you, may I have another. Fucking matrix man, nothing is real!!!!
  3. Tide31


    We are all so tired of 'them' saying we are due for a correction, now that we are impervious to the 'boy that cried wolf' - we will probably get it.

    Something that just snuck by on the newswires at 3pm was consumer demand for credit. The market ignored it. These are not credit lines cut by banks last month, these are consumers that cut back themselves on almost $22bil in credit lines. The guestimate was a $4bil decline. In the macro picture this doesn't sound like a lot of money, but I believe this is the biggest cutback ever.

    To me that sounds like fewer shoppers?
  4. It'll count when it counts. Maybe tomorrow, maybe not. We'll see.
  5. MattF


    3 months for the holiday shopping season.
  6. Mvic


    Just means consumers now have more available credit to access.

    This message brought to you by More Cash on the Sidelines :)
  7. kaciara


    or 20% rally. no one really knows.
  8. Yes, and judging by the unprecedented drop in consumer credit last month, they could give a rat's ass! :)
  9. S2007S


    I think there is risk of 20% more upside in stocks....


    I think im feeling a bit bullish now, thinking of selling all my inverese etfs at some losses and going long equities. However I know if I took that chance, tomorrow would be the start of the decline.

    Reminds me of the day my friend called me and told me he was going to sell his entire portfolio at around DOW 6800, he didnt and to this day he is just shy of gaining back all he put in. :D