September 20, 2019 07:37 AM RSS

Don’t Get Burned by a Suckers Rallies in the Stock Market!

  • Wall Street Rebel | James DiGeorgia
  • 05/15/2019 10:58 AM
Don’t Get Burned by a Suckers Rallies in the Stock Market!


President Trump tweets optimistically every time the U.S. stock market takes a “nose-dive,” in response to the growing trade war with China. Sooner or later, the market will finally recognize he’s out of his depth, and the trade war is going to lock in a world-wide recession, and brutal stock market crash.

 

By James DiGeorgia

During an online Yahoo Finance interview with CEO Noah Hamman of AdvisorShares who actively manages a large portfolio of ETF’s, warned the  S&P 500 could dip a “little” below 2,550, which is the same level where investment bank UBS sees the index headed in 2019…

“We are pretty cautious on equities. We are asking people to pare some gains and perhaps start hedging their portfolio.”

Both UBS and Hamman of AdvisorShares believe the danger of a bigger move down is possible given the realities of a full-blown trade war between the United States and China. Hamman is specifically concerned about investors getting caught in sucker’s rallies is telling his clients …

“…caution should be the name of the game for investors right now I think the ripple effect of what we are seeing could cause many challenges in the market that lower interest rates [from the Federal Reserve] don’t fix.”

Hamman warns the S&P could drop 12% to 2,500 and that impact on investors who have not paired down their exposure to the market could be ugly.


Buttress his and UBS concerns is a new Bank of America survey released Tuesday that shows over one-third of investors have taken out protection against a sharp fall in equity markets over the next three months. This marks the highest level in the history of the B&A survey.

Tuesday’s rally may be one of the sucker rallies; driven in part by President Trump’s optimistic tweets suggesting a trade deal with China would get done sooner rather than later.

Veteran strategist Matt Maley of Miller Tabak in another Yahoo Finance interview echoed similar concerns saying high stock valuations coupled with a new round of bad news in the form of the U.S.- China trade war could send stocks sharply lower….

“I think a 5% to 7% pullback would be a minimal thing. A 10% correction could be what we are looking at.”

Given the Dow Jones, S&P and even the NASDAQ index all have a history of averaging at least one 10% correction a year on average, and the current economic and political mess we see around the world. Much less the potential of a war breaking out in the middle-east, we at Wall Street Rebel also believe caution in this market is advised.




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