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Market analyst Jim Paulsen: More ‘fear and capitulation’ needed before stocks bottom

U.S. progenitors still have lower to go — it’s just a matter of if it happens “in a flash” or entertains some time, widely followed strategist Jim Paulsen told CNBC on Thursday.

Paulsen, who is faithful to with his call for a 10 to 15 percent correction, has been collect the alarm on market sentiment he believes is too bullish.

And he thinks it’s notable that Friday’s initial market-place drop, when the Dow Jones industrial average shed 665.75 points, didn’t breed the type of fearful behavior seen at a bottom.

“It didn’t cause a gigantic rush into safe haven bonds or rush into shielded haven dollar or run into gold,” the chief investment strategist at The Leuthold Organize said in an interview with “Power Lunch.”

“It hasn’t really equal generated a big rise in defensive stock performance on a relative basis. So I about we need to go lower to generate a level of fear and capitulation that can sell for succeed in a bottom.”

The market has been on a wild ride since Friday’s particle. On Monday, the Dow plunged 1,175 points and on Tuesday it seesawed a total of 1,167.5 questions before closing 567 points higher. On Wednesday, the blue-chip guide posted its biggest one-day reversal since August 2015.

The Dow fell profuse than 650 points at its lows of the day Thursday.

“This is about a valuation readjustment,” Paulsen suggested. “We have to find a lower valuation level for stocks and bonds to support this bull [market].”

While some have blamed the sell-off, in renounce, on concerns about higher interest rates and inflation, Mike Vogelzang, president and chief investment fuzz of Boston Advisors, points to a “small corner of the sandbox” — those who were in bluff volatility funds.

Two in particular have stood out amid the market commotion of the last few days: the ProShares Short VIX Short-Term Futures and the VelocityShares Daily Inverse VIX Short-Term ETN (XIV).

Both custom using leverage and provide inverse returns to the Cboe Volatility Ratio (VIX), a key measure of market expectations of near-term volatility conveyed by S&P 500 farm animals index option prices. It’s sometimes called the “fear gauge.”

“They all cease to remembered to take their Ritalin and at the end of the day they took a couple of trillion dollars off of superstore capitalizations around the world,” Vogelzang said in an interview with “Power Lunch.”

That give the word delivered, he believes some parts of the equity market needed a breather.

“At this forsake of the cycle, this is all about economic momentum, a synchronized global compactness, great corporate profits,” Vogelzang said. “That’s going to done trump this volatility trade.”

— CNBC’s Fred Imbert and Jeff Cox aided to this report.


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