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Actionable news in GBSN: GREAT BASIN SCIENTIFIC INC,

The stage is set for the next 10% plunge in stocks

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Get ready for a dive. (Image: Flickr / Justin De La Ornellas)

The stock market (^GSPC) continues to trend higher as earnings growth remains lackluster. This has caused valuations to get very expensive, signaling a stock market that’s becoming increasingly due for a sharp sell-off.

Everyone is flagging this anxiety-inducing pattern, and yet the market continues to rally arguably nonsensically.

“The S&P 500 has advanced 6.8% YTD (8.4% including dividends) despite a more modest improvement in the earnings outlook (+1.4%),” RBC’s Jonathan Golub observed in a note to clients on Monday. “Put differently, the market’s move higher has been fueled almost exclusively by multiples.”

Most analysts argue that these record-high stock prices are unsustainable without a significant pickup in earnings growth. Unfortunately, there isn’t much hope for that.

“Since EPS trends have typically been associated with S&P 500 index patterns, a sharper-than-expected uptick in profits would be a necessary prerequisite for additional upside,” Citi’s Tobias Levkovich said on Friday. “[A Citi...


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