Chris Rowe

5 Reasons the Stock Market is Going to Crash

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The market could very easily -- and probably will -- crash!

When the market starts to sell off, the very best the bulls can hope for is a 13% sell-off. That would be a mere 50% retracement of the last two-month advance.

What's more likely is at least a swift 20%-22% sell-off. That would be a test of recent (March) lows on the S&P 500 (SPX). We'll only know how real the last two months of gains have been when we witness the force of the next sell-off.

There are so many things pointing to a sharp sell-off in the very near-term future, it's amazing. The only thing -- the very last signal I need to see before becoming an aggressive bear -- is a weakening of the internal market.

Market internals have been strong. But everything else says to look out below.

Think about the following:

1. Seasonality.

We have entered the weaker half of the year. Typically, the market sells off in May. So why didn't we see that this May?

Well, we crashed so hard recently, that we had what's called a "dead-cat bounce." When a dead cat falls from such heights, with such speed, it's bound to bounce. So when there is so much scared cash on the sidelines, there is bound to be a strong bounce.

2. The reality of the latest advance.

Was it huge demand? Perhaps. But it's not as strong as you might think. Think about how much short-covering we just witnessed.

When investors short-sell stock to profit from a decline, they have to close out their positions by buying back stock -- thus adding to the upward pressure you've just witnessed.

And short-sellers weren't only taking profits buying back stock; they were also getting hammered and buying back stock -- closing out losses -- because of their bad timing!