A recent survey by Bank of America Merrill Lynch shows fund managers have more cash holdings now than at any time since June 2012. And, for those wondering, the benchmark S&P 500 index is up 44 percent in the last two years.
"This could set up for a year-end chase rally when we start to see a lot of this money get put to work," said David Seaburg, head of equity sales trading at Cowen and Company. "Come September, we could see a massive move up."
"Could there be a pause here and a little bit of a near term pull back? I think that's the case," Seaburg added. By September, though "you are going to see the market grind up and people will be chasing performance until year end…. Everybody is super confused. When we start to see more data come in positive, you will start to see that cash be put back into the market."
Richard Ross, global technical strategist at Auerbach Grayson, strongly disagrees with Seaburg's view that asset managers are waiting to deploy cash.
"The macro trader looks for trends, which is really the same thing that the technical trader does," said Ross, a "Talking Numbers" contributor. "There are not many trends right now which are as strong as the equity trend. So that's why money is being put to work here – if you want to stay in business as a macro manager, you have to be buying develop market equities in the U.S., Europe and Japan."
Ross contrasts macro fund managers with asset managers, the latter of which he says are value-driven.
"They don't see the value, so they are sitting on that cash," Ross said. "If they have not been buying stocks until this point, there is nothing that is going to get that money into the market. I think there is an air pocket below, and I would once again, be a seller here as I have been."
For Ross, the S&P 500 has been trading in an upward-sloping trend channel over the past year. The index's near-term support is at 1,900, a level that was resistance from March until May. He thinks it will break below that number and retest its 150-day moving average, currently at 1,846.
But, the long-term chart is troubling for Ross. He notes that its peaks in 2000 and 2007 were around 1,550. "I don't know if we get all the way down there but that's a very inviting target," he said. "Often times we retest the break point from a prior move [and] a prior resistance becomes support on a pullback. I know it sounds like a big drop but given the magnitude and slope of that advance, it's very plausible."
To see the full – and very heated exchange – on what's next for the market, with Seaburg on the fundamentals and Ross on the technicals, watch the above video.