Kass: Next Big Move Will Be Down

This blog post originally appeared on RealMoney Silver on June 2 at 7:51 a.m. EDT.

Money makes the world go around, especially in the world of equities.

The plain truth is that most investors, under the guise of being fundamental investors, worship at the altar of price momentum and rarely take a variant market view. Rather, most individual and institutional investors simply prefer buying strength and selling weakness. This helps to explain the overshoot to the upside in the summer of 2008 and the overshoot to the downside in early March, when there was ample evidence of green shoots taking root and economic stabilization taking hold.

While the media talks green shoots, the recent leg up in U.S. equities seems to be based more on demand for stocks overwhelming supply rather than substantive signs of emerging worldwide economic growth.

As have previously written, the carnage in fixed income -- the long bond was down another three points yesterday -- has accelerated the reallocation of pension plans out of bonds, where they are currently skewed, and into equities.

The second derivative rally is getting fully extended now as money has overwhelmed the markets.

While money makes the world go 'round, neither a bull nor a bear be I.

Unlike the many observers who now are following stocks higher and upping their S&P 500 target forecasts, I believe that the next 50 points in the S&P will be down, not up, as the clouds over the horizon expressed in yesterday's column come to the fore.

Doug Kass writes daily for RealMoney Silver, a premium bundle service from TheStreet.com. For a free trial to RealMoney Silver and exclusive access to Mr. Kass's daily trading diary, please click here.

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Know what you own: Some of the most active stocks in Tuesday's mid-morning trading include Bank of America (BAC Quote), Citigroup (C Quote), SPDRs (SPY Quote), Direxion Daily Financial Bear 3X Shares (FAZ Quote), Financial Select Sector SPDRs (XLF Quote), JPMorgan Chase (JPM Quote) and Direxion Daily Financial Bull 3X Shares (FAS Quote).