Well-known market technician Ralph Acampora, considered by some as “The Godfather of Technical Analysis,” recently made headlines when the Wall Street Journal and other major news sites reported that Ralph had finally turned bearish on the stock market.
As a regular guest to the Financial Sense Newshour, Ralph explained to listeners this past weekend what exactly he’s worried about and what would need to happen to prove his current bearishness wrong.
The main concern, he said, occurred when the S&P 500 made a new all-time high at 1700 earlier in August while many large-cap stocks had topped out and started weakening months before.
Given the current situation, Ralph says, we could see a correction “in the next month or so of anywhere between 15-20%.”
Ralph explains further that this current market environment reminds him of 1998, just before the Russian bond crisis precipitated a selloff around the globe; an event that had nothing to do with internal economic conditions in the US.
Still though, Ralph tells listeners that he has not turned bearish on the stock market long-term.
“If you take a step back and take a long-term view, you see huge bottom formations that suggest multi-year workouts on the upside in technology, financials, and industrials,” Ralph said.
Leaving some room for where he could be wrong on a coming correction, Ralph cited the oldest theory of technical analysis, Dow Theory, and said that if the Dow Industrials and Transports make new closing highs, then he’d have to change his position. Still, he doesn’t think that’s going to happen.
“Overall, it’s an improving economy,” says Ralph. Whether this correction plays out in the next month or so or not, Ralph still believes the long-term trend for the market is higher.
If you’d like to listen to the full interview with Ralph Acampora, CLICK HERE. Interview starts at 16:55.
