Back in July, Enzio von Pfeil, chief executive officer of EconomicClock.com, predicted a stock market crash in October. On Wednesday, von Pfeil reiterated his forecast, saying: "It doesn't have to be a calamitous crash. But I do think we're heading towards something. One sees that the market's become a lot more 'toppy'. It's stopped going up and up and up."
- Click Here to Watch July 15 Video for von Pfeil's Forecast
"One sees far too many players in the market that perhaps shouldn't even be there," he added.
One reason for a big selloff is likely to be strong downward earnings revisions occurring in the near future, von Pfeil said.
"There's going to be quite a bit of strong downward earnings revisions going forward, especially the outlook for 2010. And that's simply because the economic clock, of which we tell the economic time, suggests that the excess supply of goods (rising unemployment) is here to stay and you can't keep on making profits if unemployment keeps rising," he told CNBC.
This Earnings Season Won't Be as Dazzling
The worst of the earnings results will come out of labor-intensive and consumer-led industries, according to von Pfeil.
"The key earnings surprises will be in those industries which cannot keep on cutting workers," he said. "In other words, the basic materials and the very labor-intensive industries, like the car industry that very much have already gone through their cost-cutting exercises."
The U.S. will have the worst earnings results, closely followed by Europe as problems in the housing sector and consumer sector remain. But von Pfeil warned that Asia will also be affected by the earnings news from the West.
"The U.S. will come in for major surprises because you do see that the mortgage problems persist. That means that consumption is going to remain low. That means that U.S. consumer stocks cannot fair very well, particularly at the discretionary end of the stick," von Pfeil said. "(Another) region to do very poorly will be over-taxed Europe where the politicians managed to have taxed away any shred of work incentive."
"It is going to be very much in the West that you see these downward surprises," he said. "But again because of technology, it's the inter-connectedness of markets that is going to make those downward earnings revisions in the U.S. and in Europe, particularly in the consumer sectors ripple through and affect Asian market sentiment."
Von Pfeil predicted a "muted jobless recovery coming through."
China Won't Save Us
Another reason for von Pfeil's bearish prediction is that he has a "feeling that there may be some kind of a knee-jerk policy response in China. Given China's global role, could very well lead to some very severe downward market surprises."
"I do think that the Chinese growth story is a little bit of a tin drum that is understandably made to look very good," he said, adding that he doesn't believe so much in the positive growth numbers and outlook for China as he sees labor costs rising.
"I don't believe that China, with a per capita income that is a fraction of America's, is actually going to pull the world out of recession," he said.