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A Mild Correction . . So Far June 13, 2014

Posted by Tom in Thoughts.
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Well we got pretty much what was excepted, a correction from a (way) over bought market.  The chart below of the NADSDAQ Composite shows prices hugging that upper channel line (dashed gray line) and now near the “midpoint” of the channel (green line); a good place to take a breather.

NASDAQ

OK this was a little scary, especially for those who were not expecting it, but look at how well the market in general has held up. The “Money Flow” histogram (red above, with black circle) has dropped, but not by much.  The pie chart below shows the number of stocks in the S&P 1500 (a very broad index) in various stages of Accumulation (money flowing in; i.e. green), Neutral (yellow) and Distribution (money flowing out; i.e. red).

Money Flow

It’s not really very bad at all with the vast majority of stocks still being bought (accumulated / green).  Clearly folks are “buying the dips” in here.  We’re also seeing a rotation into the high momentum stocks here too.  With the oil concerns in the mid-east just about anything energy related is doing well, but Technology (notably biotech and semiconductors) are moving along well too.  Here’s the top 10 sectors:

Top Sectors

So now what?  I don’t see panic, so that’s good.  My market internal “breath indicators” are still Long/ Bullish so that indicates to me that this is likely a mild correction; so far.  With the world somewhat on edge all we’d need is for Russia to use Iraq as a diversion for a bigger move into Ukraine or the Chinese and Japanese to start a gunboat battle over an island.  It could happen.

With an overbought / over extended market any type of bad news is the catalyst for a correction and the summer season is typically a weak one for the markets.  But . . until we see more evidence of a broader negative move we can’t over react.  let’s remain watchfull, honor our stops when price drop below a key support level and then be patient.  Prepare for opportunities ahead . . . the sun will rise again . . . “sure as shoot’in”.   🙂

Have a good week.             ………………  Tom  ……………..

chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com.  All used with permission.

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