If this was the quickest correction in history and the markets do rally back to new highs expect the next correction to be signifcant.
I do have a working theory. The S&P500 has been in a certain uptrend. You can draw a trendline from May 2005 up until the present time. Everytime the price of the S&P500 gets above 8%, then it comes into dangerous territory. This time it got to 12% above that trend line before it decided to sink. The only thing this time around is that there is a very high amount of fear. As for the reason for that fear, this I am not quite certain. Last summer seemed more scary with oil heading north of 70 dollars and Bush acting very crazy. Right now the S&P500 sits at 5-6% above the primary trend line. If the S&P500 gets above 8% again, then we might see another downtrend. Therefore, I believe we are safe for the first-second quarter, but not sure after that. One scenario might be where the S&P chops for a while while that primary trend line moves up and then the S&P will move up with it in time. OR It may be where we are at a time where the trend is changing. A high amount of puts versus calls has always been a clear contrary signal. If I were to just go by the puts, then I would have to say that we are on the verge of a nice rally that will last all year. However, the primary trend line shows no evidence yet of going away. Therefore, you can expect a correction down to the primary trend in the distant future, 3rd or 4th quarter 2007 or 1st quarter 2008.
Several trillion "lost" worldwide with regard to "sell-off" mostly asian but also Europe, Latin America, and US. http://www.bloomberg.com/apps/news?pid=20601087&sid=a3rswT_KCKBw&refer=home The Morgan Stanley Capital International Asia-Pacific Excluding Japan Index climbed 0.4 percent to 400.78 as of 10 a.m. in Hong Kong. It hasn't closed higher since Feb. 27, when the biggest drop in China's shares in a decade sparked a global rout that erased $3.3 trillion of market value in five days. A few trillion is real money. There still appears to be a lot of liquidity floating around though and we may have another good push up.
Good assessment MichaelScott. That and: 1. the world is still FLUSH with liquidity and no shelter. - Everyone's been furiously bailing from real estate for the last 2 years. - Bonds/TBills/CD's barely cover inflation. - High Yield stocks pay almost triple the bond rates in dividends in some cases... and bear the hope of growing every year as well fundamentally. 2. While recession is a possibility, it's not a big one. - US growth rates are not anticipated to be as high as past years, but still growing. - the world is now a global market... we tank, everyone else tanks (in case anyone happened to miss how our market reacted to China's tanking). No one will let us tank til we all tank. 3. This is the 3rd year of a lame duck President. Traditionally, it's a great year for the market. - and yes... with a Repub Pres, and a Dem Congress... no one looking at reelection wants to see the market tank, because a case can be made against either side for the reason. We are on our way to a bubble again I think. Money will just rotate around sectors perhaps, but more and more will continue to appear as people ditch their other sorry investments that are being outperformed. The worst crash of 2000 didn't happen til nearly everyone was all in. Just as the Real Estate crash didn't happen til the grocery store clerks started waving their brand new Realtor Associate License around. When you hear the clerks at 7-11 talk about their stock investments, then it's time to get all out. Right now, there's an awful lot of juicy bears. I really do love bears.
I really want to believe that the market pays attention to what is going on in the world. However, the more I see, the more I believe that the market is in its own little world. Each year has its own set of problems that are unique, but somehow we overcome them. I think that the market just revolves around technical analysis with a few exceptions. The crash of 1929, 1987, abd 2000 revolved around one simple concept. The price was bouncing along a primary trend line and then evolved too quickly into another rising trend line or the Bump n Run formation. The markets are at a very healthy point right now. The only way I see a crash coming is if there is a sudden rise way above the primary trend line. If we get to over 8% above the primary trend line, then we should start worrying. Not worrying about a crash though. The market would have to rise above 20% over the trend line for me to worry about a crash. I see the extended market as having more opportunities then the primary.
Oh comon Bylo, you can't still be waiting for the big 10% correction? I think we'll chop around... but that's where the money's made. Back in 1999, I made a fortune buying and selling about 3 stocks, which like clockwork for MONTHS would rise $10 and drop $10 every other day. These were all 10% rises and falls, the stocks were around $100 each. It was crazy. Until 2000 blindsided me. That was.... omg painful. LOL! Another decade wiser, and haven't found the $10 a day stock yet, but this chop is going to be fun.
I have never been through anything close to a 2000 style correction, and hope I never am (though I know it's probable over a long time period). I agree we will see choppiness. I have no idea where we are headed. I do know growth really is weakening in the U.S., though, and that's just a matter of fact. Those software earnings were on fire tonight, though (Oracle and Adobe).
What about CME and ICE? They move, but you can also get your ass handed to you. But watch them at the beginning and end of the month, usually predictable moves. This market still needs to re-test the volatility of the one day drop. Unless the fed changes the dynamics of the risk environment, we get a little pump, and then another big dump day.