Technical Analyst Acampora: Stocks May Fall 15 Percent-20 Percent

Friday, 06 Sep 2013 07:56 AM

By Dan Weil and David Nelson

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Stocks are poised for a downward correction over the next few months before the bull market resumes, says Ralph Acampora, director of technical research at Altaira Ltd.

For the long term, we're in a bull market similar to the one that ran from 1982 until 2000, he tells Newsmax TV in an exclusive interview.

"Having said that, though, when the S&P 500 crossed above 1,700 in early August, I noticed something that started to bother me," Acampora said.

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"I didn't realize until then that some of the larger names . . . are starting to get very tired, very heavy," particularly the stocks in the Dow Jones Industrial Average, he said.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

"When I was a young analyst I was always told, never fight Papa Dow. If you're going into battle you need generals, and these generals are tired. I can list a whole bunch of them. You could start with IBM, McDonald's and Wal-Mart. And I scratch my head and say, what's going on?"

Then there's the drop in emerging markets. "Is there a relationship between emerging markets and these large blue chips?" Acampora asks himself.

"Yes there is. They're multinational. So there could be a problem. It could take a little bit of time, but until that gets rectified, rallies" won't last, he says. "If you're longer-term [oriented] and you're looking at the stocks I'm talking about, you might want to lighten up a little bit."

Acampora isn't sure if it's a matter of the United States having an impact on emerging markets or emerging markets having an impact on the United States.

"But when I read about the tapering that's coming — whether it's this month or next month, it's coming — it's going to have a huge impact on a lot of currencies around the world, and these markets are feeling it," he said.

In addition, "when you look at their [emerging markets'] individual economic situations, they're not as strong as they had been made out to be over the years, and it's coming back to roost. It's going to hurt them," Acampora said. Emerging markets haven't completed their decline, he says.

In a worst-case scenario, the Dow could drop 15 percent to 20 percent over the next few months, Acampora says. A 20 percent decline from Thursday's close of 14,935 would put the Dow at 11,948.

And how might an attack on Syria affect the market? "Usually, in the days and weeks before there's a conflict, the market sells off. Once the fighting starts, the market rallies," Acampora said. The beginning of the Iraq war in 2003 was a classic example, he says.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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