Talk with any trader on the Street, and the conversation will quickly turn to the stock market rally and whether current levels can sustain.
The market’s recent march higher has been remarkable to say the least. The S&P is up about 8 for the year and more than 20 percent from October lows.
“Everyone on the Street is expecting some kind of pullback,” says Fast Money trader Joe Terranova. “The question is how deep will it be?”
Strategic investor Doug Kass is expecting a 4-7% decline. Just as he told us last week, Kass, who is president of Seabreeze Partners and a CNBC Contributor, again says his research suggests the path of least resistance is lower.
“It rarely pays to buy stock when 85% of the S&P trades above its 50-day moving average as is the case today.” Kass adds that the market also tends to decline when only a small number of S&P stocks are oversold, again the case now.
(Click here to go to our entire conversation with Kass on February 22nd)
And on Tuesday Kass told us he's spotted another bear signal. He's looked at how stocks fare when 10-week moving average of gasoline prices rises. “At the rate they’re moving now– historically it has not paid to own stocks.”
All told, the data suggests to Kass that the next leg in the S&P is probably 50-handles lower, give or take. However, as the market pulls back, Kass says put together a shopping list and get ready to pull the trigger.
He suggests Home Depot, Lowes , Bank of America , Citi and ETrade .