Fundstrat’s Tom Lee, a notable Wall Street bull, warns of a potential stock market sell-off in the coming weeks, Business Insider reports.
Despite his bullish stance on stocks for the second half of the year, Lee sees worrying signals that prompted him to issue a tactical warning. “Markets in holding pattern until the July jobs [report] and July CPI. But be wary,” he stated.
“Overall, we are entering August just a bit more wary than other months.”
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Lee pointed out that the upcoming jobs report could be stronger than expected, leading investors to question whether the Federal Reserve is truly done with hiking interest rates. Any change in rate hike expectations would negatively surprise investors.
Seasonal data, indicating weaker stock market returns in August and September, also adds to the market’s potential instability. Carson Group’s chief market strategist, Ryan Detrick, suggested that a “modest pullback of approximately 5%” would be normal.
Most concerning is a technical sell indicator, DeMark Analytics’ “13” sell signal, which has just flashed. This signal, indicating a possible reversal in the stock market, has preceded significant sell-offs in the past year.
“This topping ’13’ of this index could be a sign of a larger period of turbulence. But for now, we believe investors just simply need to be vigilant,” Lee said.
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