Are stocks headed for a 20% drop?

BofA technical analyst doesn't put much hope in a Santa Claus rally.

By The Fiscal Times Dec 20, 2011 1:48PM
Bank of America StockBy Suzanne McGee, The Fiscal Times

Mary Ann Bartels, head of technical analysis at Bank of America Merrill Lynch, warned investors Monday that the Standard & Poor’s 500 index fell below its 50-day moving average last week and is now about to start testing the lows last seen in October, around 1,074 to 1,100.

Bertels gives even odds that those levels might not hold either, and that the S&P 500 might fall further, potentially dipping as low as 935 to 985. The index lost 1.2% on Monday to close at 1,205.35, but Bartels' forecast lows would mean a drop of another 22.5%.

So much for any hope of a Santa Claus rally. But Bartels isn't painting a portrait of unrelieved gloom. Market breadth -- another measure of the overall market’s direction, which Bartels captures by using a 10-day moving average of the new 52-week highs minus the new 52-week lows on the New York Stock Exchange -- is volatile but positive. And if investors can just hold on, she promises that "a new cyclical bull market" will take shape sometime next spring, during the second quarter of 2012.

Still, if you’re looking for alternatives to stocks, Bartels doesn’t offer much hope. Commodity price charts signal big drops ahead, she says, thanks in part to what she expects to be a period of significant underperformance by emerging markets. European large-cap stocks are laboring under a cloud (an Ichimoku cloud, to be precise, for those who monitor such technical concepts). Bond investors might be pleased if her predictions come true and prices edge higher, but those counting on fixed income investments to generate yields won’t be too thrilled. (The higher a bond’s price moves, the more its yield declines.)

Bartels did find at least one stock, in a surprising sector, that might be worth a look. Interestingly, on the day that her own employer, Bank of America (BAC), fell below $5 a share for the first time since March 2009 (it closed at $4.99), Bartels pointed to financial stocks as "the trouble spot for the market," a sector for which bullish technical indicators remain elusive. Yet Bank of America’s own stock, she says, is approaching territory where it can be described as "near oversold." Even there, "near" might be the key word.

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26Comments
Dec 21, 2011 10:46AM
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"head of technical analysis at Bank of America Merrill Lynch"

 

This is a joke isn't it?

 

What was she predicting in September 2008 ?

 

And "even odds" is the equivalet of flipping a coin.

Dec 21, 2011 12:35PM
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And why would anyone trust the worst run company in America?
Dec 21, 2011 1:14PM
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So she can see the future all the way to the spring from her charts? I'm not impressed, the Gypsy lady that reads tea leaves down on the corner can see waaaaaay further into the future than that!!
Dec 21, 2011 1:37PM
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Merrill....they managed to lose most all of my retirement.  I depended on them to make the right moves for me. After all I was paying them for their expertise...I wasn't all that market savvy, at any rate this clown isn't any brighter or hasn't any more insight than my dog.

Here are my predictions, the market is going to go up...the market is going to go down...the market is going to trade sideways...one of these should work this year, and all of you can come back next year and sing my praise's.

Dec 21, 2011 1:01PM
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This stock market is like the Otis elevator.
Dec 21, 2011 1:33PM
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the oil speculators keeping the 40% higher than supply demand price will ensure that her predicition comes true there sucking the life out of everything in there path thats means all consumers and business
Dec 21, 2011 1:48PM
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What a reckless comment by Merrill. Haven't they done enough damage?
Dec 21, 2011 3:02PM
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let Bof A fail ,they are part of the reason we are in the GREAT DEPRESSION right now  
Dec 21, 2011 3:07PM
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People have to remember that the stock market and the state of the economy are two different things.  Companies making and selling needed products can sometimes do very well with the low interest rates and high productivity of workers.  The problem is this can't go on much longer with the country insolvent, states, counties and cities are in debt so bad they spend all day looking for revenue and their about to tap the public out.  The only result that has to come is a lower standard of living for everyone.
Dec 21, 2011 3:12PM
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The market will go up if and when our basic economy improves (unemployment, debt reduction, housing recovery, increase in manufacturing & technology activity, etc.).  It will go down if Europe tanks.  What these "wizards" say (especially one from BOFA) Just shows how much economic and business sense some of these financial nerds have.  If they would just use their Harvard education to do basic investment decisions andsound  "predictions" rather than throwing fuel on the volatility of the market we (and the stock market) would all be better off in my opinion.  i.e. take a vacation!
Dec 21, 2011 1:50PM
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a drop?? I'm shocked!!! all the talking heads and "experts" that write here say "happy days are here again"......

what recession...luxury goods are booming......

article on the side on this one........

 

the rich say alls well also........

but they gotta layoff a few people first......

Dec 21, 2011 3:05PM
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Do not invest in the stock market is absolutely correct.  Do not trust these people for they know not what they are doing.  The market is being manipulated and all stocks are oversold and overvalued.  A MUCH better bet is taking your life savings and placing a bet in Las Vegas.  Merrill Lynch employs the biggest idiots I have ever met but still pays them well for their misrepresented sales they make which lose value consistently every single time.  People can say all they want about the net present value of a dollar but if you follow advice like is offerred here, be prepared to have nothing.
Dec 20, 2011 5:10PM
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@havasu46    Santa Claus only comes once.    Sell off is coming when the New Year comes in and the Euro fails.
Dec 20, 2011 3:41PM
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Sorry Mary Ann, here comes Santa ClausGift with a bow
Dec 21, 2011 2:30PM
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Well, it's nice to know that a rally will come next spring, In the meantime, consumer confidence will tank.
Dec 21, 2011 3:03PM
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Is this MaryAnn saying that the market will lose 20%, but that only her own company is still a good buy? Whats up with that?Someone should Occupy her front yard.What a beach she must be.Angry
Dec 21, 2011 2:25PM
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DO NOT INVEST IN THE STOCK MARKET! I REPEAT, DO NOT INVEST IN THE STOCK MARKET! ONE MORE TIME...DO NOT INVEST IN THE STOCK MARKET. IT'S GONNA TAKE YOUR MONEY LIKE IT NEVER EXISTED.
Dec 21, 2011 12:40PM
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Stocks are a speculative bubble. This is like Tulip mania, South Sea bubble. Google for "STOCK MARKET KONDRATIEFF WAVE" to understand why.

Dec 20, 2011 8:30PM
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@AgainstGovWaste

 

Smile The EU is going to practice quantitative easing just like the US has for he last 24 months. It's already started with the EU giving 3 year low interest loans to banks that are using sovereign debt as collateral. The bond boys and hedge funds love FUD and volatility so they can short and then cover. It's been working since last May be I think it's going to take a rest for a couple of months.

Dec 20, 2011 5:54PM
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Santa looks a lot like the big fat banker that sold you that bogus mortgage and now is foreclosing on your home.  So much for the Santa "Clause" rally.
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