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As you can imagine, the action in equity markets of late is quite satisfying for David Rosenberg, who has been unwavering in his bearish outlook.  He isn’t changing his tune now.  Rosenberg says there is no v-shaped recovery on the horizon and that this market isn’t (and hasn’t been) trading on fundamentals and is entirely technically driven:

“Yesterday’s sharp and broadly based decline in the equity markets was the worst session since April 20 of last year. The S&P 500 is now down 7.6% from the mid-January peak and the Asia-Pacific market is just 40 basis points shy of seeing a 10% correction after having its worst session in 10 weeks; emerging market equity funds lost $1.6 billion in net redemptions in the past week, the largest outflow in nearly six months. Financials were clobbered 4.2% and led the decline, though basic materials weren’t too far behind. Volume swelled as all the major averages fell off — not a good sign for the bulls.

I went for a 5km run at the club I recently joined (I aim to lose 30 pounds ASAP just to get back to being fat again, and the 30 pounds after that will finally take me back to my college days). Fast Money came on the tube and it was almost laughable to see them all grappling for the reasons why the selloff occurred. China here. Greece there. No, sorry. Remember Bob Farrell’s eleventh rule: “it’s the news that makes the market; not the other way around.”

He continues to think the market is overpriced and ripe for a serious decline.  He throws in a couple of jabs at CNBC while he’s at it:

“This is a stock market that is as overpriced as it was heading into the October 1987 crash and as the case back then, it wasn’t about the fundamentals but about policy discord between the U.S., Japan and Germany. A market priced for perfection requires perfection on all fronts.

The comments on Fast Money were that the fundamentals hadn’t changed — this selloff is pure emotion. Really? We had a 70% rally from the March low in advance of any serious turn in the economic data — this was purely a bear market rally that was rooted in the technicals (and short coverings). How do we know? Because at the January 19 high in the S&P 500 of 1150 it had completed a 50% retracement off the slide from the October 2007 highs to the March 2009 trough.”

Where does this all take us?  Rosenberg says the technical drivers mean we are likely to visit the 50% retracement level which would take us back to S&P 912:

“Now, since this is a technically-driven market, we are bound to get a 50% reversal of the bear market rally, which would take us to 912 on the S&P 500 — so keep your seatbelts on. We had been warning for a while that too much complacency had set in, and what happens when the market shoots up 70% without taking any serious break along the way? Investors tend to believe that we are into some sustainable new parabolic bull run.”

Source: Gluskin Sheff

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