A blogger-analyst with an enviable track record fears the market could drag it down

Click to enlarge. Source: The Big Picture

Two weeks ago, I found this e-mail in my inbox:

"This market has all the earmarkings of a major sell off. No one is hedging their positions and the market continues to grind up on zero volume and with continued outflows from equities and inflows into treasuries. I've generally been a bull, but I've never seen anything like this. The scariest part of this is the lack of insurance buying to hedge positions. This can really cause a catastrophic event if the whole market is long and unhedged. I wouldn't be surprised to see September-October 2008-type selling in May."

It's easy to sound like a Cassandra these days, and if this message had come from someone else, I might have dismissed it. But when Andy Zaky warns of a catastrophic correction, I pay attention.

Zaky, who writes an irregular column called Bullish Cross, is one of the blogger-analysts whose estimates in advance of Apple's quarterly earnings reports regularly beat the Street's. (See, for example, here, here and here.)

And I remember his prediction in November 2008 -- when the market was crashing and Apple (AAPL) was selling for $90 a share -- that the stock would hit $230 within two years. He was so sure he was right, he told the readers on The Mac Observer's Apple Finance Board, that he was selling his house and putting his money where is mouth was.

A few days after his recent e-mail, Zaky sent another note pointing out that the Chicago Board of Exchange showed a call-to-put ration of 7 to 1, which according to him made April 15, 2009, the most bullish day in the history of the equity markets in terms of sentiment. Then, last week, he sent the chart reproduced above and, in larger form, below the fold.

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