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business newsStock Market Inflection Point? Yes; Correction? Who Knows
The SPX number everyone's been focused on has brought investors the first down week of the year. But does it mean a correction is afoot?
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– Donald Rumsfeld
SPX 1,350 – well, 1,354 if you want to be exact. The number everyone’s been focused on has brought investors the first down week of the year. But, does it mean a correction is afoot? It’s been 35 days and ~12% from the December 2011 lows, yet all without a 2% down day and any meaningful drawback. Is it time for a correction? As Bob Dylan so eloquently says… The answer, my friend, is blowing in the wind. Meaning, even when something seems so certain, we still must wait for the answer. Otherwise stated; inflection point -- yes, for certain. Correction certain? Not one bit. (Review last week’s article, A Potential Correction Is on the Horizon, for further explanation – watch for short-term momentum/swing trend break.)
As much as investors are looking for immediate answers, it never ceases to amaze how soon they tend to forget just what they're actually looking for. Interesting statement to say the least, wouldn’t you agree? So just what is it they’re looking for? Direction. Yup, that’s it -- direction. But, there is one caveat: time and scale. For months now investors have desired clarity in order to better ascertain the answer to this quest; whether it comes in the form of political, geopolitical, economic, global or otherwise.
On May 1, 2011 – exactly 288 days ago – the market (SPX) closed at 1,361; pretty much where it is now. And yet, investors are scrutinizing what will transpire tomorrow to influence decisions which could be relevant for years. Let’s take a look at a longer-term chart to supplement this banter with additional meaning.
Click to enlarge
It is only when stepping back to gain a larger (longer) perspective of the markets, that we really grasp the risk associated with how we’re invested, or for that matter, how we want to be invested. This chart speaks for itself as it is plain to see the converging resistance points (from the top of the "2011 Channel of Indecision" and backside of the prior Cyclical Bull Trend). Not to be a Debbie Downer, but for as good as this 2012 has begun, it’s just not that important in the broader sense of the word.
My point today is nothing more than awareness. Stepping back far enough to make decisions based on, for lack of a better analogy, “Time Horizon,” rather than short-term momentum and market hype. Since 2012 began it’s all been about a “renewed energy in the market” or “the beginning of a new bull run.” Now maybe that’s true, or maybe it’s not. The point is that it’s way too early to tell when evaluating the greater picture. Please don’t mistake my firm's cautious view and potentially jaded opinion of absolutes regarding investing with the desire to see this market have a 20-30% year.
As always, we hope this helps
Editor's Note: Read more at Tuttle Asset Management.
Twitter: @TAM_News
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