Speculative mania is setting market up for a major correction, CFRA's Sam Stovall warns

According to CFRA's Sam Stovall, conditions are ripe for a major market correction.Trading NationStovall sees the mania around the Reddit rebellion as a major red flag. When speculation becomes widespread, he notes it usually indicates investor confidence is too high and prices are too frothy.

"I do believe that [low] interest rates as well as [stimulus] payments and boredom are causing investors to be striving after companies that really don't have the fundamental underpinnings," he said. "That could end up being a fairly negative situation for many of the investors left holding the bags."'s 200-day moving average, Stovall calculates stocks would fall at least 10.5% in a swift fashion. That would imply about a 400 point drop from Monday's close.

Stovall, who has been on Wall Street since 1985, warns the swiftness of the breakdown would take many retail investors by surprise."February is the second worst month of the year — the only one after September to post an average decline," said Stovall, who notes the negative trend is more pronounced during a president's first term in office.

Bu there's a silver lining in Stovall's pullback forecast. He believes the market would bounce back fairly quickly. Since WWII, Stovall finds pullbacks around 10% typically take one month to go from peak to trough.

TradingNation Bull crap bull crap bull crap. You suck now cnbc

TradingNation

TradingNation Yeah, eventually but NOT TODAY 🤡

TradingNation If that man could see the future as he seem to imply. He would be super wealthy woukdnt he ,the froth ness is in a small section of sticks ,I don’t see how that could trigger a 10% correction

TradingNation or a selloff of quality names to fund the short covering... a 'rotation'

TradingNation Manipulated news all the way. fakenews

TradingNation Yes millions of people buying stock is sooooo dangerous. I never realized what shills cnbc are.

TradingNation We landed on the moon!

TradingNation thanks for this news

TradingNation Why don't you try to report actual news.

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