As David Rosenberg mentions in his most recent note, the idea of a correction has now become the contrarian case with almost everyone expecting a continued rally, or a correction to be met with a “buy the dip” mentality as the Fed jumps to the rescue to any market decline. So yes, we all know the bull view and how right it has been for so long. That said, he cites 4 reasons to be concerned in his latest note:
- The trailing P/E multiple for the S&P 500 just reached 16X for the first time since April 2010, a level that touched off a near-term correction.
- Sentiment readings are right off the chart. Market Vane bullishness just hit the 70% level for the first time since (ahem) June 22, 2007.
- Leverage has staged a big revival, with margin debt in April jumping 1.3% to $384.4 billion.
- The net speculative long position for S&P contracts on the CME remain near record highs at 37,449 contracts at last count – an 88% surge at an annual rate just so far this year!
Now, please feel free to use the comments section to mock the idea that a stock market can go down….
Source: Gluskin Sheff