Market Crash in 60 Days? | A Trade-able Range Is Set
Plus a look at CRM and AVGO.
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Our View
I want to take a break from the “View” today and change gears a little bit. A friend of mine, Cary from Artac Advisory, posted this great video yesterday talking about the continued strength in the US Dollar.
As you know, the Dollar has been having a big impact on equities lately and I would suggest giving the video a watch sometime today.
Further, I’m not sure how many of you are familiar with Larry McDonald, but he is the author of “A Colossal Failure of Common Sense” and is the founder of The Bear Traps Report.
Even if you’re not a big macro buff — I’m not necessarily, but I do find it interesting — it’s easy to acknowledge that McDonald has done some great work in this arena.
Just recently, he pointed to a worrying development.
“Our 21 Lehman systemic risk indicators that look at equity and credit point to one of the highest probabilities of a crash in the stock market looking out 60 days…when we deteriorate in jobs the next two, three months, that will bring into question the S&P earnings, and the S&P earnings are probably $190 [versus estimates of $226], so that'll trigger it.”
Our Lean
I don’t know if that will really be the case, re: a stock market crash in the next two months. But I firmly believe this mess isn’t over yet.
Last fall, everyone was perma-something, either believing completely that the market was going back to all-time highs or going down to 3,000 in the S&P. I said, “What if we stay range-bound, with no new highs or lows in the next year?”
That would be the pain trade as both bulls and bears get toasted and frustrated waiting for the move that never comes. Of course, eventually the bulls will win out, but it won’t be immediately, IMO.