Two days ago, I spoke on the phone to my mentor. He told me that he had been sitting on some money he needed to put to work for some clients. He had been waiting since December to get into the market. He had been waiting for a correction along the lines of 5% or so. The day before yesterday, he decided that he could not wait any longer, so he jumped in. The day we spoke, he said to me, “Now watch. The market will correct, now that I am in.” He said that jokingly, and I don’t know if the last two “off” days in the market are the beginning of a correction, but our conversation typifies one of the great mistakes many an investor or trader makes – trying to time the market when the trend line is going from the lower left corner to the upper right corner. My mentor did the right thing, no matter what the market did in the last two days. The trend is up, and that trend will continue, but this does not mean the market will not correct significantly sometime soon, as the question below suggests.
Many of the sentiment indicators are very bullish…in my experience this leads to a correction … do you see one here, and if so, of what magnitude?
Yes, I do see a correction coming, and, yes, I see it in the 5-10% range, as my mentor does. What I don’t see is a major reversal, either economically or in the market. In fact, I see a resurgence of the real estate market coming this spring, right along with the turnaround in the employment picture. Below is one reason …
Freddie Mac said the average rate on the 30-year mortgage dropped to 4.77 percent from 4.86 percent the previous week. The average rate on the 15-year loan slipped to 4.13 percent from 4.20 percent.
Another is that along with lower rates, banks are beginning to soften up in the loan requirements. Loans will be easier to get for homebuyers, car buyers, and any other purchase that requires credit. The banks see what I see – a larger pool of pent up buyers wanting to get their piece of the American Dream.
Factories are cranking up production. The service sector is growing at its fastest pace in more than four years. Fewer people applied for unemployment benefits over the past month than in any other four-week period in more than two years. Consumers are spending more freely, and a payroll tax cut is likely to boost their activity further. All that suggests hiring will accelerate in the months ahead
Now, this is just me talking. There are those who do not see as rosy a picture, but even they, the folks paid to watch, regulate, and facilitate the economy, see the momentum increasing, even if they couch their words in conservative language.
WASHINGTON – Federal Reserve Chairman Ben Bernanke goes to Capitol Hill on Friday more confident about the economy and the outlook for hiring, but not enough to pull back from the Fed’s $600 billion bond-buying program. .
Trade in the day; invest in your life …
