End of This Correction?
So, its been scary in the US market since the start of July and many are expecting this to be that huge correction that has felt somewhat overdue all these while. I felt the same way, especially when this coincides with my prediction of a significant correction in Q4. However, today, I am inclined to call the bottom and that this is nothing more than a minor pullback due to several strong pivotal indicators.
First of all, the S&P500 formed a two days pivot on strong bullish divergence. Most times these two indicators coincided in the past pullbacks and corrections have resulted in an immediate turn around back into the original bull trend. Other times it may linger around that area before finally turning around as well. Either way, it does indicate a high probability bottom within the framework of a minor or intermediate bullish correction.
Secondly, bond yields which have been dropping like a rock across the board the past month has finally halted its decline as investors stop rushing for the safety of bonds. With bond yields this low and the market at this level, investors could finally see some value returning to equities.
Thirdly, the total equities put call ratio that has been completely in the put options zone all month long has finally returned back to the bullish area. Of course, one day of coming back down below par does not mean much on its own but it happening with other supporting evidences such as the above does give it more meaning.
Fourthly, there simply isn't a strong enough reason for the market to get killed yet. By "strong enough reason" I don't mean a strong enough bad news. Quite on the contrary, a strong enough reason would be the economy and the market being so super strong and overheated that it needs to be hammered back into reality. That's how all previous market crashes started. So far, that's not the case yet and there is still plenty left to invest in with the US economy growing steadily and slowly and the Eurozone largely on track as well.
Of course this is extremely early to call any turn arounds and that most analysts would wait for more evidence... this is why they miss out of the best opportunities. I have already started preparing my Master's Stock Options Picks subscribers with bullish positions today... have you started yet?
First of all, the S&P500 formed a two days pivot on strong bullish divergence. Most times these two indicators coincided in the past pullbacks and corrections have resulted in an immediate turn around back into the original bull trend. Other times it may linger around that area before finally turning around as well. Either way, it does indicate a high probability bottom within the framework of a minor or intermediate bullish correction.
Secondly, bond yields which have been dropping like a rock across the board the past month has finally halted its decline as investors stop rushing for the safety of bonds. With bond yields this low and the market at this level, investors could finally see some value returning to equities.
Thirdly, the total equities put call ratio that has been completely in the put options zone all month long has finally returned back to the bullish area. Of course, one day of coming back down below par does not mean much on its own but it happening with other supporting evidences such as the above does give it more meaning.
Fourthly, there simply isn't a strong enough reason for the market to get killed yet. By "strong enough reason" I don't mean a strong enough bad news. Quite on the contrary, a strong enough reason would be the economy and the market being so super strong and overheated that it needs to be hammered back into reality. That's how all previous market crashes started. So far, that's not the case yet and there is still plenty left to invest in with the US economy growing steadily and slowly and the Eurozone largely on track as well.
Of course this is extremely early to call any turn arounds and that most analysts would wait for more evidence... this is why they miss out of the best opportunities. I have already started preparing my Master's Stock Options Picks subscribers with bullish positions today... have you started yet?
posted by Jason Ng at 6:32 PM
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