Our most recent newsletter indicated that a correction was likely. Is the selling of yesterday and today the start of the long-awaited correction to the great start this year? With just over an hour left in trading, a few significant trading levels have been breached. For the S&P, the 20 day moving average at 1507 was crossed early in the trading session and the Dow has fallen below the psychologically important 14,000 level with yesterday's losses. The S&P was below 1500 earlier today but is trying to rally back above that important level. Often, the last 30 minutes of trading gives a good indication of where the market wants to go so we will be watching the close carefully. The bulls will need to finish with some strength in order to quell the losses. As we have discussed recently, a correction along the lines of 5-7% would be normal considering the recent advance and, indeed, would be healthy for the longer term prospects of the market as it would give a good entry point for some of the money still left on the sidelines.
Many in the financial press are pointing to the release of the Federal Reserve minutes yesterday as the cause for the recent selling. While the minutes were a little unsettling as some of the members indicated disagreement with the continued easy money provided by the Fed, we don't believe the minutes were all that significant but rather just a reason for those nervous about the steep rise in the markets to take some of their profits.
Watch the close for whether or not the correction has started or if this is just a little profit taking.
Welcome to the extended version of the BAM Market Note. We are not bloggers by nature but have had clients and friends inquire about our thoughts on the market in between our newsletters. The number and content of posts will likely be determined by the conditions of the markets and the interests of our readers. We would greatly appreciate your feedback and comments.
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