Monday, October 13, 2014

A real correction at last

"Real" stock market corrections - declines of 5% to 20% within a rally - have been rare lately.  When the S&P 500 index closed at 1906 on Friday, it marked a 5.2% drop from the all-time high mark of 2011 reached on September 18th.  The last two corrections before that were in February of this year and June of last year, and both of them bottomed-out at around 5.5% below the previous highs, meaning they barely qualified as corrections.  We're overdue for a bigger correction of 10% or more.


The place-holding version-1 marketbots are now pegged optimistically at an internal price forces number of 10 out of 10.  This is due to a dependable multi-year seasonal factor that tends to trump almost every other indicator.  Even so, the other internals that the marketbots are now ignoring are still mostly bullish, and there's no sign of a pending crash signal, so the long-term prognosis for the market is now about as favorable as it can be from a technical perspective.  Of course, if World War 3 breaks out tomorrow then all bets are off - some events can't be predicted by market data.

Yes, the S&P may continue to fall for the next couple of weeks and complete a more significant correction, but objective seasonal factors and internals favor a continued rally in the long term.

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