Darst: 3 bear market red lights are flashing
David Darst, senior advisor at Morgan Stanley (MS) Wealth Management, likes lists, and he shared his bear market checklist Wednesday on CNBC a day after the Dow Jones Industrial Average (Dow Jones Global Indexes: .DJI) dropped 272 points.
On " Squawk Box ," he said three of his six indicators of a bear market-a drop of 20 percent from record highs-are flashing a red light.
"So that's why the market is trying to come to terms with this," he continued, but concluded that he believes stocks have more room to run higher after a short pause. That puts him in line with many market watchers on Wall Street.
Here is Darst's bear market checklist:
Darst counts 719 trading days since a stock market correction-a drop of 10 percent from record highs. "It can still run further," he said. "The market is [just] basically taking a flu shot."
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According to AAII, bullish sentiment, defined as expectations that stock prices will rise over the next six months, fell 6.4 percentage points to 35.4 percent this week. Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.7 percentage points to 30.9 percent.
The group's vice president, Charles Rotblut, told CNBC on Wednesday that when bullish sentiment falls that, counterintuitively, signals more of a buy signal. "If we saw bullish sentiment fall into the 20s that would be a more optimistic sign."