It's been nearly 2 months since my last blog entry back on April 2. Little did I know that a statement made in that post would prove to be so prescient. The broad market indices had a banner performance in the 1st quarter boasting the best performance in 14 years. Many bloggers and market commentators were opining on what the remainder of the year would bring.
Here's an excerpt from that April 2 entry:
"There are a lot of blogs stating how historically after a big 1st
quarter, the full year performance tends to continue. And while that's
certainly possible, it doesn't preclude weakness setting in for several
months in the middle part of the year."
Since then, the S&P 500 has undergone a 9% pull back from the April 2 intraday high of 1422, to the intraday low of 1292 set last Friday. Many sectors have performed far worse, with the precious metals and basic materials sectors particularly hard hit.
The market has absorbed a tremendous amount of negative news in the last few weeks from the news of JP Morgan's CIO high stakes trade blowup, to continued sovereign debt problems in the Euro zone. And while viewing a chart of the S&P 500, the topping pattern lasted only about 10 weeks.
Most larger declines originate from longer and broader topping patterns such as occurred in 2011, when the head and shoulders pattern lasted 25-26 weeks which set up the 21% decline in the SPX.
So I'm inclined to think this current correction could come to an end in the next short period of time; or at least we'll stop declining and possibly tread sideways for awhile. That type of action would allow stocks to repair their charts and setup for a renewed advance.
Here are a few stocks that jumped out in my scans after yesterday's close.
ALWAYS use stops to protect from huge losses.
Some others of note: ATHN, TRIP, EXPE, SSI, LL, FIRE
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