JPMORGAN'S TOM LEE: Don't Buy Any More Stocks Until The S&P 500 Drops 50-100 Points

Bloomberg via YouTubeTom LeeJPMorgan's Chief U.S. Equity Strategist Tom Lee says it's time to move to the sidelines following the biggest sell-off in the stock market this year that has taken place over the past two days.

Lee is known as typically bullish on equities – and he remains positive over a longer time frame – but for now, he tells clients in a note, "it is challenging to see the elements to support a big lift in equity prices from these levels. Thus, we recommend investors turn cautious and defer incremental purchases."

In the note – titled "Stepping Aside Short-Term; Fade Strength and Look for Better Entry Point Around 1400-1450; Big Picture Constructive" – Lee gives three reasons why now is the time:

1. The headlines are turning negative, and macro headwinds are increasing for now. This includes the rise in gas prices, the effect of expired payroll tax cuts on consumers, and sequestration fears.
2. Investor sentiment is still too high. Several measures of this are at or near peaks.
3. Trading in corporate bonds has been choppy, which Lee says is "providing less support for rising equity prices."

On the other hand, Lee warns, "Equities are likely to rebound in coming days given two heavy days of selling and it is possible equities could rebound without a deeper pullback with M&A and performance anxiety being the drivers (managers buy this dip and reverse recent losses)."

Lee expanded on this idea – that there could be no correction – in his last note. To read more about that, click here >