As the market keeps chugging higher, market participants continue to call (hope) for a "5-7% correction" that has not materialized. That the market has stayed in a relatively tight, upward channel frustrates those who are under-invested, as well as those who sell out on the first day or two of weakness.
From the November 2012 lows, the largest correction in the S&P 500 has been 3.4% in late December when many traders were on vacation for the holidays. Then we saw a brief 2.9% dip in late February. But the market quickly reversed and headed back up.
There are any number of reasons why the market is higher. The Fed pumping $85 Billion per month into the financial system certainly doesn't hurt. But there's no denying that housing has strengthened, and the huge increase in energy production in the U.S. is another big reason.
Will we see another market crash when the Fed pulls back from their stimulus plan? Maybe. Possibly. But why concern yourself with what could happen at some point in the future?
That said, it's interesting to hear an increasing number of market pundits come on financial TV and tell us that "the market is cheap". March is the 49th month of bull move off the March 2009 lows. So keep that in mind for some perspective.
Getting back to the recent market, I've been looking closer at the price action inside the upward channel and found a repetitive pattern - "3 Dips & A Shakeout" - and you want to buy the shakeout.
On both "shakeouts", RSI 14 held the low to mid 40s. We're currently in the third phase of this pattern. If it holds true, the recent 3 days of weakness marks the 2nd dip.
Click on chart to enlarge:
From the November 2012 lows, the largest correction in the S&P 500 has been 3.4% in late December when many traders were on vacation for the holidays. Then we saw a brief 2.9% dip in late February. But the market quickly reversed and headed back up.
There are any number of reasons why the market is higher. The Fed pumping $85 Billion per month into the financial system certainly doesn't hurt. But there's no denying that housing has strengthened, and the huge increase in energy production in the U.S. is another big reason.
Will we see another market crash when the Fed pulls back from their stimulus plan? Maybe. Possibly. But why concern yourself with what could happen at some point in the future?
That said, it's interesting to hear an increasing number of market pundits come on financial TV and tell us that "the market is cheap". March is the 49th month of bull move off the March 2009 lows. So keep that in mind for some perspective.
Getting back to the recent market, I've been looking closer at the price action inside the upward channel and found a repetitive pattern - "3 Dips & A Shakeout" - and you want to buy the shakeout.
On both "shakeouts", RSI 14 held the low to mid 40s. We're currently in the third phase of this pattern. If it holds true, the recent 3 days of weakness marks the 2nd dip.
Click on chart to enlarge:
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