Technicals Continue to Warn

If we close down today (the Dow is off more than 50 points at present) we will have 6 trading sessions in a row of lower closes.  It had been 158 trading sessions since we have a 4-day losing streak.  I am not sure what the record is for days without 6 down days in a row, but I am guessing it has been a while.  We are seeing more and more technical indicators lining up, all pointing to a correction, or possibly even a crash.  The longer we go with so much negative technical traffic without a correction, the more severe the correction will be, once it begins.  For whatever reason, investors seem absolutely oblivious to the signs of pending doom, and this reluctance to sell will only serve to increase the number of sellers, and the magnitude of their selling, once the correction begins.  This should be a stampede of selling, as investors scramble to save their paper profits, once it is clear that we are in a correction Phase.

The good news is that corrections are a necessary and healthy aspect of any bull market, and we are overdue and in serious need of one, if we are to have a chance of pushing to new, higher highs.  Markets cannot continue to trade up forever, and with valuations where they are – 19X earnings, we really must correct to get valuations back down to something more reasonable.  Investors should have a detailed plan for reinvesting after the correction already in hand now.  If they don’t they need to get one immediately.  This will likely be the best buying opportunity over the next 3 to 5 years.

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