This Is Your Final Warning... A 'Significant Reversal' Is Coming
By Justin Brill
The recent rally in stocks is an example of classic bear market action.
And last week, one of Wall Street's most respected forecasters joined Porter in his bearish calls.
In an interview with financial-news network CNBC, JPMorgan Global Head of Derivative and Quantitative Strategies, Marko Kolanovic, said the rally since mid-February has been driven mostly by "short covering," a scenario in which investors race to unwind bearish bets they made while stocks were falling.
Our colleague Jeff Clark agrees. As he told his Stansberry Short Report subscribers last week...
Institutional money managers who were leaning bearish one month ago have been forced to buy, or else risk underperforming their benchmarks. Folks who got overly aggressive on the short side and held on to those positions thinking the market would bail them out rushed to cover their trades.
The average Joe on the street who listens to the talking heads in the financial media finally threw in the towel and bought into the stock market...
Despite the rally, Jeff recently warned Growth Stock Wire readers about some significant "warning" signs. He believes we're likely just days away from a broad stock market sell signal.
This week, we learned drug company Valeant Pharmaceutical's recent troubles aren't only a concern for the credit markets... They could also cause significant losses in the retirement accounts of many unsuspecting investors.
If you're not familiar, the Sequoia Fund is an exclusive, value-focused mutual fund founded by Bill Ruane, a close friend of investing legend Warren Buffett. From its creation in 1970 through 2015, the fund earned annualized returns of more than 14%, giving it one of the best long-term track records on Wall Street.
Because of this elite performance, the fund was extremely popular. It has been mostly closed to new investors for years. But it seems some companies were able to pull some strings and grant their employees access.
According to the Wall Street Journal, more than 50 companies – including Disney (DIS) and Berkshire Hathaway-owned National Indemnity – have offered the fund in their employee retirement plans.
Unfortunately, Sequoia was also the single largest holder of Valeant shares. The fund held as much as 30% of its portfolio in the company's stock. Even after the recent bounce in Valeant shares, the fund is down more than 11% this year... and has underperformed 98% of other funds.
Given the fund's reputation, we were surprised to learn it owns Valeant shares at all... We suspect many of the fund's investors may be equally surprised when they open their 401(k) statements this month.
Fortunately, most stock mutual funds don't make such concentrated bets... But this story is still a great reminder to take a closer look at what you own.
If you've followed our advice and taken a few simple steps to prepare your portfolio, you have little reason to worry today.
If not, consider this your wake-up call. You may not get another chance.
And if you're looking for further evidence that stocks could be headed for a rough patch, consider this...
UBS technical analysts Michael Riesner and Marc Müller have one of the most impressive track records on Wall Street this year. They not only called the recent rally in gold, they also correctly predicted each of the last two stock market corrections. They even called the recent February 11 bottom in stocks, nearly to the day.
So what are they saying now?
They, too, believe the recent rally was simply a bear-market rebound, and not the start of a new bullish trend.
They say the market is set up almost exactly as it was in early February, except from the opposite extreme. In particular, they note that while the market was extremely oversold last month, it's now more overbought than it has been any time in the past six years.
They believe a "significant reversal" is likely to begin soon, followed by another leg lower in an ongoing bear market.
Source: Growth Stock Wire