Merrill Lynch Economist: 10 Reasons the Bear Market Is For Real

The Dow Jones Industrial Average is down more than 9% from its recent May 2 peak. The S&P 500, meanwhile, is off nearly 16% from its October 2007 all-time high, down more than 10% in 2008, and only 3.5% away from retesting its March low.

Key technical levels of 1,325 for the S&P and 12,000 for the Dow were taken out on Friday, noted Merrill Lynch’s David Rosenberg. Meanwhile, the heavy volumes of more than 2 billion NYSE shares traded and six decliners for every advancer demonstrates that the bear market is for real, he said.

The economist provided clients with ten reasons why:

• Punishingly high oil prices that are up 40% this year and heightened inflation expectations.
• Downward analyst earnings revisions.
• The Fed hinting at possible rate hikes.
• A 100-basis point backup in bond yields.
• Possible downgrades of the auto companies by the rating agencies.
• Actual downgrades of the monolines.
• Higher credit spreads; TED spreads.
• There are expectations of more financial sector write-downs.
• Poor macro data flow so far for June – Philly Fed, N.Y. Empire Indices.
• Sell in May and go away actually works.

Comments

[CLH]

cranky--You are right

[raytayzmd]

...given Merrill Lynch's brilliant history of predicting market turns I would speculate that today will be a good day to buy.