Monday’s Decline In Stocks: Relax, It’s the Break We Anticipated

A little over a week ago, on March 20 in “Financial Stocks are Laggards“, I wrote:

I believe these stocks [financial stocks] will soon reverse direction again and the inverse spikes (the falling knives) will morph into the leading edge of some sort of better defined bottom reversal patterns.

While today’s (Monday) 3.48% drop was led by those financials, it is also the correction described in “Time to Take A Break” last Thursday. I know today’s decline is uncomfortable, painful and gnaws away at self-confidence but there’s nothing to suspect that the reversal is in jeopardy (for those who have come around to believing that March 9 was the bottom or very close to it).

As a matter of fact, more than 12% of those stocks actually increased today and, as you would expect, half outperformed the S&P 500 (^GSPC) while the other half performed worse.

How far or how long will this correction be? My guess is 5-10 trading days and another 5-10%. I base this pure speculation on the my guess (as indicated in the chart in last Thursday’s post) that the 2002-03 will act as support this time around.

Unfortunately, I’m joining the Snowbird migration by driving back North over the next 3 days. I’ll be catching up in the evenings but probably won’t have time to write. We’ll catch with you on Friday. I asked that you not buy stock as the market was careening downhill last year. Today, I’m asking you to not lose faith in this market.

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Comment by Money Central Online

2009-03-31 05:09:59

The word “better defined bottom” caught my attention. I saw a similar comment given by Mark Mobius in Bloomberg on March 23, 2009 07:05 EDT, when he said “But I have a feeling we’re at the bottom and now we’re building a base for the next bull market.”

I have been watching the US Market and have been reading various blogs, listen to many videos from experts giving their own view of the markets, research reports and so on.

Currently, as i (together with the thousands of traders worldwide) wait in eager anticipation of the potential emergence of the “mini bull”, i am also being very careful to only examine the evidence expressed in price,pattern,time and volume on these charts (both in the US Markets and in Asian Markets). I am doing what Joseph said in his blog on Sunday, March 29, 2009, about being “prudent”.

I am keeping a open mind at this junction, as i find that i can give 10 reasons for the “mini bull” and another 10 reasons for another Bear Rally. So did many market gurus around.

But the phase “better defined bottom” and “building a base” is well said, since it is printed on the charts that we are out of the sharp down channels in the US Markets, at least for now.

I must say that i enjoyed reading Joseph’s blogs in http://www.stockchartist.blogspot.com and have benefited from his sharing tremendously.

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Comment by Raj kumar

2009-03-31 05:33:01

Hello Sir,
I’m really impressed by your thoughts!!
You really anticipate the market mood very well.
I’m a trader from india and i like your comments very much.
Thanks for such a valuable notes !

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