Marc Faber: Beware, a False Rally May Be Coming
Marc Faber is one of the most widely followed strategists working today. His insights are highly valued for being remarkably accurate.
A celebrated economist and author of the Gloom Boom Doom newsletter Faber is a renowned bear, who first rose to prominence after he correctly predicted the Crash of ’87.
Since that time he predicted the rise in the price of oil, precious metals, and other commodities as well as the decline in the dollar and the 2007 Great Recession.
Affectionately named Dr. Doom because his commentary is often negative, it’s fair to say that when Faber speaks the Street listens.
And on Wednesday Faber told CNBC's Fast Money to beware a false rally in the late summer or early fall.
Faber believes catalysts are currently in place that could trigger an advance.
“In the US there have been a few strong stocks such as Kimberly Clark, Johnson & Johnson , Merck and Altria," he says. "They have all made new highs. Also there are some deeply oversold stocks, – mostly economically sensitive companies such as miners.”
Faber says if investors continue to 'stick with what's working' and also bid up some oversold stocks, the market could rally. "We could go to 1450 or even 1500," he says.
However, he believes any advance will be a false rally. At 1450-1500, he says the S&P will be at the top of the range. Faber’s proprietary research suggests to him “we’re in the late stage of a mature market and not a new bull.”
From those levels he sees bears taking the market down. Faber estimates the S&P could trade down about 150 points from where we are now, or about 1250. However, at 1250 he thinks the potential of QE3 then sets a floor.
Posted by CNBC's Lee Brodie
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Trader disclosure: On August 15, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long SBUX; Joe Terranova is long WFM; Joe Terranova is long AAPL; Joe Terranova is long EMC; Joe Terranova is long NXPI; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long INTC; Pete Najarian is long YHOO; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Jon Najarian is long call spreads in AAPL; Jon Najarian is long call spreads in ABX; Jon Najarian is long call spreads in GLD; Jon Najarian is long call spreads in JPM; Jon Najarian is long call spreads in HUN; Jon Najarian is long call spreads in CSCO; Jon Najarian is long call spreads in FB; Jon Najarian is long call spreads in GMCR; Jon Najarian is long call spreads in OAS; Jon Najarian is long STSI; Jon Najarian is long CBOE; Jon Najarian is long CME; Jon Najarian is long GLUU; Brian Kelly is long INGR
CNBC.com with wires.