The people calling for no correction actually think this market can go up day after day without any problem. We have seen this over the past 10 months, in the last month and half the DOW is up over 1000 points. Now things can continue to go straight up but in the long run everyone knows what happens. The 27th of FEBRUARY caught EVERYONE off guard, there will be another one waiting for this market soon, when and how much of a fall is anyones guess. Remember, greed is strong, but fear is stronger.
Obviously you know nothing about arbitrage. Arbitrage doesn't care which direction and to what magnitude a market moves, it is just a differential. Where were these supercomputers on 2/27?? A Silcon holiday perhaps?
From the Stock Traders Almanac: "Since 1914 the Dow has gained 50% on average from its midterm election year low to its subsequent high in the following pre-election year." The smallest gains: 1946 - 14.5% (industrial contraction after ww2) 1978 - 20.9% (OPEC-Iran) 1930 - 23.4% (economic collapse) 1966 - 26.7% (Vietnam) 1990 - 34.0% (Persian Gulf War) 2006 low 10706 on June 14th.
In that case I think it will be healthy but very unlikely. I do not know. All I know is that when there is a 1% true selling day(DOW, S&P and Nasdaq down more than 1% on the same day), I'll exit, till then I'm staying long. I was expecting some sell-off around 1500, when that did not happen I went long.
Im not the biggest know it all. I studied these equations and patterns hard after we corrected in May 2006. The May 2006 correction was a disaster to my 401k and I only broke even in that account by October. So I studied the indexes more closely and came up with these formulas. http://bp1.blogger.com/_DC_WvCGCWQ8.../uGavY33j0Ms/s1600-h/0508-$niklongbullish.jpg Tim Knight asks the question how anyone could have known where the Nikkei was going to correct. If you use my simple formulas (they are not mine by the way, just standard technical theory you can read out of any book or on the web), then you would have known. See the cup in the middle of the graph? The right peak of that cup is about 27500. 27500-1000=17500 17500+27500= 45000 It never made it to 45000, but 39000. 14% off. However, around a certain point in the mid-30000s you could have started taking money off the table, placing cash into better quality instruments, and just been aware that you were approaching the peak. My simple formulas give you an idea when to expect a correction, but its in no way exact. So around 1650, I will start moving more money to cash or to better quality instruments and wait to see what happens next. In the case of my 401k which only allows me to choose from a list of mutual funds, I will move the money into a balanced fund which consists of bonds/large cap stocks and cash. In the event of a market correction, I'll be ready.