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This Is a ‘Short-Covering Rally’—Take Profits Now!

Should investors continue to buy into the rally or take profits? Jerry Castellini, president and chief investment officer of CastleArk Management, and John Lekas, chief executive and portfolio manager at Leader Capital, shared their insights.

“First of all, it’s a short-covering rally and I’d definitely be taking profits here,” Lekas told CNBC.

Lekas noted that the bond marketis up 25 to 30 percent in the last few months, outperforming the broader market’s 3.2 to 3.3 percent rise for the year.

“We see GDP going lower…and we see unemployment going a lot higher, because you’re going to get some consolidations and what comes with that is about a 15-percent termination rate for employees,” he warned.

10 Percent Upside?

In the meantime, Castellini said stocks could rise another 10 percent from current levels.

“If you look at tech sales and transportation and consumer, those middle of the part of the economy items have been strong for the last 2 to 3 months, and those are the things that can drive us higher in terms of earnings momentum going into 2011,” explained Castellini.

“Use that as your catalyst and you can justify seeing stocks with another 10 percent rally going into year-end, and a decent 2011.”

Scorecard—What They Said:

  • Castellini's Previous Appearance on CNBC (Aug. 24, 2010)
  • Lekas' Previous Appearance on CNBC (Aug. 13, 2010)

More Market Opinions—Read and Decide:

CNBC Data Pages:

CNBC Slideshows:


Tuesday's Top Dow Laggards (as of this writing):







No immediate information was available for Castellini or Lekas.