Tags: Hochberg | risk | market | index

Elliott Wave’s Hochberg: ‘Tremendous Risk’ in the Market

Tuesday, 02 Apr 2013 07:48 AM

By Michelle Smith

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Stocks had very good first quarter, but there is “tremendous risk” in the market right now, says Steve Hochberg, chief market analyst at Elliott Wave International.

Many people are thrilled with the stock market performance.

The first quarter concluded with the Dow Jones Industrial Average up 11.25 percent. To find a better first quarter performance for the index, it is necessary to look back 15 years, according to data from WSJ Markets Data Group cited by Barron's.

Editor's Note:
Economist Warns: 50% Unemployment, 100% Inflation Possible

The Standard & Poor’s 500 also had a record closing high during the first quarter. That index saw gains of 10 percent for the period.

But, Barron's says, the S&P 500 actually performed better last year, when it posted 12 percent gains for the first quarter. This detail seems to be garnering far less attention than the recent rally.

And that underscores Hochberg's point that many people are overlooking important details right now.

“Stocks had a great first quarter in terms of the return. But, there are a lot of things going on in the periphery that we think are going to have consequences as we move forward throughout the year,” Hochberg told Yahoo.

For example, at one point precious metals dominated the conversation, but Hochberg says this market peaked about two years ago and has been moving lower ever since. He points out that long term interest rates and yields on 10- and 30-year treasuries have been creeping up since last July.

Most had not expected it, but the U.S. dollar has been on the rise. And it gets little airtime, but the Nasdaq 100 topped in September of last year and has been “peeling away” since then.

Hochberg explained that another important indicator of just how risky this environment is is the fact that no one thinks there is risk.

“I think there is tremendous risk in this market, and one of the reasons is because no one thinks so right now,” he explained.

“I think the market is in a topping process now. It's going to be diffuse. It's going to be drawn out, probably through April. And we'll slowly roll over into the next portion of what we think is a return to a big bear market,” he warned.

Hochberg expects 2013 to an exception to the historical norm. The old adage goes sell in May and go away.

“I think its sell now through May, actually,” Hochberg noted, as he expects one index after another to make a high, then start peeling away.

“The emotion that drives a bull market is hope. And hope dissipates very diffusely,” he said.

We are definitely on the way back to the March 2009 lows, Hochberg explained, but the move won't be immediate.

Of course, some will disagree.

While U.S. markets may be overdue for a downturn they're unlikely to get one this month, according to Deutsche Bank strategist David Bianco. That’s because April is, on average, the second strongest month of the year and the Fed is committed to making more asset purchases until the job market improves, Bianco wrote, according to MarketWatch.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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