08/16/2010 01:39 pm ET Updated May 25, 2011

No Relief for the 'Stuck Market'

Hey, for now, at least, maybe it makes sense to call the stock market the "stuck market."

I got that idea from the daily non-stop yo-yo action in equity prices, the ongoing tug of war between the bulls and bears, both of which make compelling cases, and growing signals from the stock market that it's likely to head either sideways or down for the balance of the year. Or maybe even longer.

At the moment, even though there's no relief in sight, bullish sentiment is dominant. But fear is rapidly on the rise, as evident by last week's string of four losing sessions in which the Dow plummeted nearly 396 points.

That also seems to be the thinking of Carter Worth, Oppenheimer & Co.'s chief technical strategist, who tells me the "the tail-chasing of 2010 will likely continue, that equities, as an asset class, are stuck...and we'll wind up the year where we started (around 10,428 in the Dow). That's 125 points above the current 10,303.

As the Dow was diving 265 points last Thursday, one of the anchors at Bloomberg's financial network suggested the plunge presented investors with an opportunity to get into the market at a discount.

Worth heartily disagrees. He's hoisting warning flags, noting that it's shocking that such stocks as Intel, Hewlett Packard and Cisco Systems are gapping down and dropping on heavy volume. Selling like this, he says is something more than trimming, profit taking or group rotation; it smacks of people dumping stocks, of exiting positions without regard for price, and with no intention of returning.

In other words, he observes, we have an unhealthy, directionless market, a standoff between the bulls and bears and people yelling "get me out at any price."

What makes it all so confusing is that depending on your sentiment, it's easy enough to make a bull case or a bear case.

The bull case is pretty obvious: Record earnings, lots of cheap valuations, a wall of money on the sidelines, strengthening balance sheets and extremely low interest rates.

The bear case is equally obvious: a sudden slowing in the economy again, continuing high employment, a renewed slump in housing, the growing probability of a double-dip recession and rising worries of a global economic slowdown.

Likewise on the bear side, a possible resumption of European debt woes (some say it's a sure thing), a ballooning debt and deficit, the impact of financial regulations and higher taxes and shrinking confidence in the ability of the Obama administration to get the economy cracking again.

Costa Rican money manager Felix Heligmann, who supervises about $85 million of his family's and friends' assets, says unless you're an in-and-out trader, this is the wrong time to buy or own stocks. Accordingly, there are no equities in his portfolio.

What bugs him, he tells me, is every day seems to bring another disappointment. Given the global risks, Worth sees no letup in them, nor importantly, he says, does he see anything of a promising nature on the horizon that could promote a sustained rally any time soon.

Accordingly, Heligmann views any rally as a selling opportunity and he thinks mutual fund investors should run for cover while they still have the opportunity to do so.

He's certainly right about the disappointments. They're clearly on the rise. On Wednesday, for example, several banded together to drive the Dow down 265 points--a cooling of the Chinese Economy, a warning from the Federal reserve that the pace of the U.S. recovery was slowing and renewed fears of worldwide economic slowing. The next day was followed by yet another disappointment, a rise in weekly unemployment claims.

Even some long-term market bulls, those who would be quick to peck away at their favorite stocks during any significant sell-off, are playing it very safe. One is San Francisco money manager Gary Wollin, who manages about $100 million of assets under the banner, Gary Wollin & Co.

Noting that "fear is back, while greed is vanishing," Wollin says "I'm not buying anything, just keeping my powder dry." His reasoning: "It's a scary market." His biggest worry, he says, is the possibility that the economy could go back into a tailspin, which would push the jobless numbers higher.

Wollin also ridicules the widely circulated suggestion of another stimulus package. Pointing to the prior $787 billion rescue plan, he notes "we shot all our bullets before and nothing happened. It's like supplying the Titanic with defective life jackets."

The bottom line here: Watch out for the "stuck market." Other than periodic rallies--which consistently falter--the market, even with its Viagra (namely better than expected earnings and huge liquidity on the sidelines), is acting increasingly impotent.

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