Sunday, September 27, 2009

Feels Like a Correction is Coming

To me, it feels like a market correction is coming soon. Here are some of the factors that may lead to a correction:
  • Market has rallied significantly in the past seven months. The Dow, Nasdaq and S&P500 indices have advanced over 50%, close to or at 1 year highs, since the March 9, 2009 lows before pulling back last week. There have been no corrections (pullbacks of 10% or more) in that time.

  • Government stimulus ability is lessening. The Cash for Clunkers program is over. The first time home buyer credit will finish at the end of November.

  • Unemployment continues to be high. The economic recovery has been slow and new jobs are not being created. As unemployment rises, more foreclosures occur which then slows the housing recovery.

  • Superstition. Historically, September and October seem to have more big market corrections than other months. Also, I just recently turned cautiously bullish and put some funds in stocks last week, which probably means a top has occurred :-)
  • I've been wrong before about a correction, since I first expected one in May, 2009. There still seems to be a large amount of cash on the sidelines waiting for a pull back before being invested in stocks. Perhaps, the reinvestment of these funds is preventing the market from declining significantly, preventing a correction from happening, which allows the market to continue advancing, for now.

    For more on New Beginnings, check back every Sunday for a new segment.

    This is not financial or investment advice. Please consult a professional advisor.

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