Last night, the key US indices fell again on HIGH VOLUME. So many distribution days in a short period confirms that the US market is in a confirmed downtrend as it goes through a correction. The Singapore STI is following suit by shedding another 51 pts to be down to 2286+ ( as of 13 June 3pm)

The good news is that earnings and profit forecasts remains high, earnings are still strong. This over pessimism stems from a whole variety of factors like Interest rates, fear of growth slowing, Japan tightening their money supply etc.. ( read the full article ‘Don’t bet the ranch on a rebound’ by Jim Jubak on moneycentral.com for a full picture)

As you know, the market will ultimately recover and return to greater heights. These short term corrections are healthy in a sense that they clear lots of excesses and form solid bases for the next stage of the bull run. If you think about it, it is providing the PERFECT OPPORTUNITY to make lots of money once the market has bottomed out and starts to regain its strength.

Although the market will ultimately rebound even higher, take note that, Since the 1970s, Market corrections during Bull runs (which we are now in) HAVE AVERAGED 13% OFF THE PEAK.

Since this downturn began on May 10, the Dow Jones Industrial Average ($INDU) is down 7.3%, the S&P 500 ($INX) is down more than 6.5%, and the Nasdaq is down nearly 9.9%. That puts this market within striking distance of the traditional definition of a correction as a 10%-to-15% drop in the major stock market averages.

So, in other words, the market STILL COULD CORRECT ANOTHER 3-8% DOWNWARDS before the next uptrend. How long this will go on for could be 1-6 months???? As such, I am selling my S&P 500 CFD positions which I bought and waiting for the market to go down another 3-8%, before re-buying again and waiting for the next confirmed uptrend.

For those holding any momentum positions, it may be a good idea to sell even though it has not breached below 8% below purchase price. You will find the value stocks will still dip but not as severe as momentum stocks. Those holding on to value stocks also may want to cut loss 15% below purchase price and start to buy it back once market corrects even more. While you can STILL hold your value stocks and ride out this short storm, you could possibly make even higher profits if you re-buy at a greater discount.

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