Are we going to face a strong correction?

V

viktor_k67

Today we had strong bullish volume surge on the S&P 500, DJI and Nasdaq 100 indexes. Could it be sign of the end of bullish wave and coming correction? - see the index charts below.

20140716dji.png

20140716sp500.png


At the same time I see the negative divergence in the number of new high (stocks making 52-week high) and new lows (stocks making 52-week lows) on the Russell 2000 index. This mean that starting from October 2013 the number of companies making 52-week high is constantly dropping...

20140716russell2000.png

Charts courtesy of marketvolume.com

Some on Yahoo finance talking about the end of the Bullish market:
http://finance.yahoo.com/news/the-indicator-that-proves-the-bull-market-is-ending-115943375.html

CNN warns that mid-term election period is usualy negative for the stock market:
Wall Street braces for midterm elections - Jul. 16, 2014

So far market indexes do not look bearish, however I would appreciate on input on the possibility of a strong market correction.
 
viktor_k67 said:
So far market indexes do not look bearish, however I would appreciate on input on the possibility of a strong market correction.
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Depends what you mean by a "strong market correction". We're in the latter stages of the cycle at this point with maximum bullish optimism, and momentum has been very strong. The most likely reasons you'll see an 8-10% correction are a) some major external catalyst has occurred which creates temporary fear in the market, e.g. Asian crisis or 9/11, or b) we're headed into the last 6-12 months of the cycle and the volatility pendulum is swinging up, as the excesses of the boom phase bubble to the surface and make investors rethink their allocations.

Until we reach one of those points the market is likely to continue the slow grind up, working off overbought conditions with 3-6 month periods of sideways chop.
 
Market driven up by fewer and fewer stocks making higher highs? The per bar change seems to be easing off. The volume could be just noise, but I'd say a correction's about due.
 
Swan Noir said:
Why?
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My post was made jokingly.

A correction is considered a 10% pullback; a strong correction is as much as 20%; a bear market is generally labeled when a pullback is beyond 20%.

Bear markets come out of recessions or serious credit crises.

At some point there will be both a correction and a bear market. But right now the only fear that asset managers have is fear of underperforming their peers. They need to play catch up and every dip is being snapped up, plus momentum feeds on itself.

Every reversal pattern over the past few years has resulted in new highs. The market has shrugged off every "crisis" and comes up with validations for why every bit of negative economic news is a reason to rejoice in the continuing economic recovery.

When the market keeps making new highs, everyone who's long is pain-free. Everyone who held onto their long term investments through the last bear market is not only "whole" again, they're gaining with each passing month.

It will take a lot at this point to seriously scare anyone in such an environment.
 
I understand why the market keeps advancing -- you didn't mention the world is awash in cheap money -- just wanted to know why you thought another leg of that magnitude was in the offing.

Didn't know it was a joke.

NoDoji said:
My post was made jokingly.

A correction is considered a 10% pullback; a strong correction is as much as 20%; a bear market is generally labeled when a pullback is beyond 20%.

Bear markets come out of recessions or serious credit crises.

At some point there will be both a correction and a bear market. But right now the only fear that asset managers have is fear of underperforming their peers. They need to play catch up and every dip is being snapped up, plus momentum feeds on itself.

Every reversal pattern over the past few years has resulted in new highs. The market has shrugged off every "crisis" and comes up with validations for why every bit of negative economic news is a reason to rejoice in the continuing economic recovery.

When the market keeps making new highs, everyone who's long is pain-free. Everyone who held onto their long term investments through the last bear market is not only "whole" again, they're gaining with each passing month.

It will take a lot at this point to seriously scare anyone in such an environment.
More...
 
And cheap money means what for the stock market? DID YOU KNOW that when one person buys shares and puts his money into the market someone else sells to him and takes his money out? Regardless of whether the money was cheap or expensive in the first place :)

It is difficult to scare people right now and everyone is buying every dip. Compare this to the situation in 2009 when everyone was easily scared, the dips were prolonged and assumed by most people to be the start of the "next leg down.."
 
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