Are overly bullish investors blindly driving stocks higher and taking you for a ride?
After weak earnings from Alcoa and a warning from Chevron, investors are starting to worry that all is not right on Wall Street.
Doug Kass of Seabreeze is among the growing number of strategists that thinks there’s much more to lose on the downside than there is to gain on the upside.
Of course Kass is known for being a bear, but he’s also known for being accurate. He called the subprime crisis as well as the bottom in March of last year.
And he says amid these first few days of earnings season, the storm clouds are gathering.
Although Kass admits stocks could go higher in the near-term, he feels confident that a correction is on the horizon, largely because bullish investors are all but blind to the negative catalysts in this market.
They include sluggish employment, pressure in the commodities space and the threat of higher interest rates.
“In markets and in life, we are consistently bamboozled by appearance and consensus,” he says. “Too often, we are played as suckers as we just accept the trend, momentum and/or the superficial as certain truth without a shred of criticism.”
In other words, Kass thinks bullish momentum has taken the market too far too far.
"We're going to have a correction," he tells Fast Money. "The market is going to be non-plussed by earnings and I think stocks get whacked by 10% or so."
And Kass is not alone. Last week on Fast Money's Halftime Report Bill Strazzulo of BellCurve said technical analysis suggested much the same.
"With the S&P between 1100 and 1150 I think it’s time to take profits, Strazzulo said.
“If you’re a short term trader there may be a small move higher- the S&P could even go to 1200 but bigger picture the fair value on the S&P is between 950 and 900. “
”There’s much more to lose on the downside than there is to gain on the upside. The risk reward doesn’t make sense here. It’s time to step back.”
What do you think? We want to know!
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Trader disclosure: On Jan 12th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (AA), (AKS), (BAC), (FXI), (GE), (INFY), (LVS), (MGM), (SBUX), (MOO), (INTC), (VALE); Seymour Is Short (TSO); Finerman's Firm Is Short (IJR), (MDY), (SPY), t (IWM); Finerman's Firm Is Short (USO); Finerman's Firm Is Short (UNG); Finerman Owns (AAPL); Finerman's Firm Owns (BAC) Preferred, (BAC), (BAC) Call Spreads; Finerman's Firm Owns (WFC) Preferred; Finerman Owns (BAC) Preferred, (BAC); Finerman Owns (JPM) Calls; Finerman's Firm Owns (MCD), (MSFT), (MSFT), (PBR), (STJ), (TGT), (TJX), (WMT), (YUM), (STJ), (BDX), (BCR), (BSX), (GOOG); Najarian Owns (AMAT) Calls; Najarian Owns (AA) Feb. Calls, Is Short (AA) Jan. Calls; Najarian Owns (CLF), Is Short (CLF) Calls; Najarian Owns (FCX), Is Short (FCX) Calls; Najarian Owns (MGM) Call Spread; Najarian Owns (MS); Najarian Owns (STJ) Calls; Terranova Is Long March British Pound Futures; Terranova Is Long Copper Backwardation: Long May 2009, Short July 2009; Terranova Is Short (AGU), (JCI), (CMA), (ICE), (ESS),(CAL); Terranova Owns (BAC), (QCOM), (MSFT), (EMC), (FTO), (XOM); Terranova Owns (XHB) March Puts; Adami Owns (GS), (INTC), (AGU), (BTU), (C), (MSFT), (NUE); Kaminsky Is Short (QQQQ)
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