April 18, 2013

Short the markets

Up to now there is little question that investors are feeling the pressure of under performance chasing price strength and ignoring the warning signs of slowing global economic growth, a worsening profit outlook and expanding technical divergences (and low NYSE volume). Hedge funds are now at their highest net long exposure in some time, sentiment studies are uniformly bullish, and retail investors are warming up to stocks. As a result of these factors (and others), stocks are overbought -- maybe even dramatically so.

But I see it as only a matter of time until reality adversely impacts stocks. In fact, it is my view that this could happen momentarily.