It's been so long since the stock market has done anything except inch higher, making it easy to lose sight of the big picture for stocks. The reality is, the S&P 500 is less than 3% off it's all time highs. Regardless of whether you think this is a buying opportunity or the beginning of the end of the rally, there's still time for traders to adjust their portfolios.
Count Charles Nenner, founder of the Charles Nenner Research Center, as someone who thinks the sell-off has only just begun. In the attached video, Nenner explains that those buying now in anticipation of an improving economy have missed the bus by four years. Good news gets bought once by the smart money, he says. Expectations that the macro picture will improve were a bullish catalyst in 2009. Now it's time to sell the news.
Nenner says his firm took off all of its equity exposure when the S&P was at 1,510 specifically so they "wouldn't have to deal with all this mess." He bases his work on cycles of time and price. From that perspective he says stocks are going to be forming a top in late April. Any market close more than a couple points below 1,544 on the S&P 500 would be an indication to him the market is ready to roll over in a big way. As of mid-day Friday, stocks are bouncing between 1,540 and 1,550; perilously close to what Nenner would consider a technical breakdown.
What happens then?
"I think the beginning of May it starts to get scary," says Nenner. Most people would argue it's plenty frightening already, both in and out of the stock market.