FINANCIAL ADVISOR INSIGHTS: Analysts Can't Agree On Where Stocks Will Head Next

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U.S. Stocks Will Probably Fall (The Wall St. Journal)

The Dow recently hit the 14,000 mark, and stocks are near pre-recession levels. Some experts are worried that the U.S. stock market is starting to look expensive and advisors are bracing themselves for a pullback.

"Stocks look pretty frothy at this point, and technically speaking, the market seems poised for about a 4% retrenchment," Gregg Schriro, a portfolio manager at United Asset Strategies, told the WSJ. Persistent political turmoil could exacerbate such a fall especially with blue-chip stocks.

The Dow Could Be Stuck Around 14,000 For Some Time (LPL Financial)

In the past, whenever the Dow has passed a round number benchmark, like 12,000 or 13,000, it's always taken it close to a year, to hit the next round number benchmark, said LPL Financials' Jeff Kleintop, in a note.

"For each of these round numbers (11,000, 12,000, and 13,000) the Dow has crossed in the past few years, it has taken the better part of a year for the market to break free of a period of ups and downs after reaching the milestone before beginning to move toward the next one. The current levels on the index may linger for six or more months."

The Stock Market Will Dip And Rally A Bit More, Before It Plunges (Nomura)

The stock market could see a few more dips and rallies before it plunges, said Nomura's Bob Janjuah in a note.

"There is not yet sufficient leverage in risk-on positioning in my view. I think we need at least another round or two of ‘buying the dip’ before we can consider positioning to be at extreme enough levels to set up the conditions necessary for a major sell-off (25% to 50%) as opposed to a minor correction (5% to 10%)."

"...A weekly close at a new all-time high would I think lead to the final parabolic spike up which creates the kind of positioning extreme and leverage extreme needed to create the conditions for a 25% to 50% collapse in equities over the rest of 2013 and 2014, driven by real economy reality hitting home, and by policymaker failure/loss of faith in 'their system'."

Bond ETFs Are An Accident Waiting To Happen (TF Market Advisors)

"The growing use of ETFs by institutions is a key part of that self-reinforcing feedback loop.

"...A now regular occurrence is a bond trader gets “lifted” in the morning or sells bonds and is left short. That trader waits all day hoping to find a seller of those bonds. At the end of the day, rather than lifting an “egregious” offer, or going home short, they will buy some ETFs to cover the market risk. Of course the next morning, everyone sees the spike in the ETF and views it as a sign that the market got really strong into the close, so they try to buy more bonds. This behavior first became noticeable in the credit markets with the creation of CDS indices but is now occurring with more frequency in the ETF space.

"The 'arbitrage' community also plays a role in these loops, especially when quoted bond “prices” don’t reflect the reality of where the bonds would trade."

This is really risky, said Tchir, as this loop could break at anytime, causing the corporate bond ETF market to fall, but it is unlikely that this will happen soon. "I don’t see anything to trigger this loop right now. Europe is doing some things to reduce risk. The Fed is pumping money into the system," he said.

Trade Receivables Back A $17 Trillion Credit Market (Sober Look)

"It turns out that the biggest financing market is not in corporate bonds or even mortgages. It's trade receivables," writes Walter Kurtz. "According to the Receivables Exchange, $11 trillion of trade receivables is originated by small and mid-size businesses and another $6 trillion by large corporations, for a whopping total market size of $17 trillion."