Market Correction is Official

[retire@40]

Definitions of Market Correction:[SIZE=-1]

• A drop of at least 10% in one of the market indexes such as the Dow Jones Industrial Average, Standard & Poor's 500, Russell 2000 (for small capital companies), or other market index.

[/SIZE][SIZE=-1]Now that the market has corrected, what next?[/SIZE]

I don't understand how all the sellers did not see this coming. On this forum, we've been talking about credit-related problems in the banking system for months, so it was known for a long time. It appears current sellers in the market had blinders on and just took them off and got spooked.

 

[Running_Man]

The market will continue to a decline on a YTD basis of 29% by year end

 

[BUM]

Selling? I'm buying. If I sell anything it would be QID.

 

[retire@40]

The market will continue to a decline on a YTD basis of 37% by year end

And you calculated this how?

 

[joxx12]

Selling? I'm buying. If I sell anything it would be QID.

Buy that which is being thrown away

 

[BUM]

Buy that which is being thrown away

We have a bingo!

 

[Sheryl]

I'm really trying hard not to look, or not to think about it, or not to panic. But its sort of depressing when I was almost there, to my ER target number, to watch the backslide. Every 100 points the Dow drops means another couple months I have to work and save.

And my SO has already quit - given notice - done getting paychecks as of 9/15/07 so it's really sort of scary to watch our nest egg shrink by the hour.

OK - I've officially worked myself up into a tizzy. Going back to work now.

 

[ERD50]

I don't understand how all the sellers did not see this coming. On this forum, we've been talking about credit-related problems in the banking system for months, so it was known for a long time.

But, at any point in time, isn't there ALWAYS something hanging over the market? Terrorist attack, SS, medicare, deficit, everyone will lose their job to China/India/Mexico, killer bees, bees dying, this-or-that, etc.

Yet, those that stay in the market are rewarded over the long run. Are you always going to be out of the market, because something might happen?

A broken watch is right 2x/day.

-ERD50

 

[Running_Man]

And you calculated this how?

Oops I corrected it was 29% was my prediction 37% was the amount it was going to drop from the top - and was derived as an average of the first year of bear market returns of severe bear markets. Naturally actual results may vary but I do feel this is the start of a severe recession.

As I just heard on the radio, part of the problem is liquidity use to be cash on hand it has become available lending on hand. Housing starts have dropped as announced today to the lowest level in 10 years. Walmart the other day stated that they are noting their clientel (annual incomes less than 40K per year) have an inablity to make purchases at the end of the month. This is not just a subprime problem, I see where Countrywide has secured 11.5 Billion in bank loans to service it's mortgage business and their commercial paper was downgraded. Countrywide has financing commitments from banks of 285 billion - many of which the banks can get out of - but I would not want to be lending Countrywide money. Again I do not see these items as leading to a buying opportunity. This is not the prospective selling of September 2001 where the terrorost attacks led to fear of what would happen to the economy - this is the economy and what will it do to economic activity.

Could easily get some really sharp nice rallies but over the next 12-18 months I would expect the market to continue to decline in unison with economic activity.

 

[haha]

Don't know what will happen,but this morning is likely at least a temporary blow-out. I sold some QQQQ puts, (enough to get my money off the table).bought some BAC, JNJ, a few other things that I will be happy to own for a long time. Overall, I feel good about BAC at 5%+ yield. Also I notice that a thrift I bought in the beginning of August is up about 15%- so there are condstructive elements at work beneath the surface.

Ha

 

[donheff]

[SIZE=-1]Now that the market has corrected, what next?[/SIZE]

It may go up or it may go down.

 

[jIMOh]

I think the hysteria might drop it another 5-10%... but there is a lot of cash on the sideline, waiting for an entry point.

We rebound because
a) the sideline money will drive up volume
b) provided employment stays healthy, we have little to worry about, IMO.

 

[Sam]

It may go up or it may go down.

Right on. Can't say it any better.

 

[maddythebeagle]

I think the hysteria might drop it another 5-10%... but there is a lot of cash on the sideline, waiting for an entry point.

We rebound because
a) the sideline money will drive up volume
b) provided employment stays healthy, we have little to worry about, IMO.

I have allocated pretty much what I wanted to put in the for the year....but if it gets worse, I will have to check under the coach cushions....

 

[al_bundy]

I think the hysteria might drop it another 5-10%... but there is a lot of cash on the sideline, waiting for an entry point.

We rebound because
a) the sideline money will drive up volume
b) provided employment stays healthy, we have little to worry about, IMO.

i can find the link later, but earlier this week i read that mutual funds are at their lowest cash position in years making a significant correction unlikely

 

[jIMOh]

i can find the link later, but earlier this week i read that mutual funds are at their lowest cash position in years making a significant correction unlikely

what was the volume like today? was it heavy selling? IMO if institutions did not have cash, not a huge issue- implying individual investors are panicing and much of the selling could be "stop loss" selling on previous orders.

 

[Texas Proud]

Just curious....


But is the correction 'official'

It did not close down 10% from the highest close.... so why is it 'official'?

 

[haha]

i can find the link later, but earlier this week i read that mutual funds are at their lowest cash position in years making a significant correction unlikely

Al, you may have this indicator backwards. A high mutual fund cash position is said to provide support for the market; and this has tended to be true at the extremes at least.

 

[LOL!]

Maybe not "official" yet. I am told the market has to close at 10% down. Did that happen?

 

[FinanceGeek]

As I mentioned in another thread, I suspect the market is starting to price in the possibility that the Dems win the presidency next year and keep congress.

Regardless of which political party one favors (in my case, I firmly support "none of the above"), it seems quite clear that the investment community favors predictability, hence gridlock is welcomed by many as a way to force compromise. I think we've all seen very clearly in the last 15 years that allowing either party to operate open loop is very bad for the country.

 

[missionfinder]

it seems quite clear that the investment community favors predictability, hence gridlock is welcomed by many as a way to force compromise.

Perhaps the investment community also fears an increase in the capital gains tax rate as well?

 

[al_bundy]

Al, you may have this indicator backwards. A high mutual fund cash position is said to provide support for the market; and this has tended to be true at the extremes at least.

Bear Mountain Bull » Home

here is it. down to 3.8% cash so there isn't that much money on the sidelines to buy and drive up prices

 

[retire@40]

Just curious....

But is the correction 'official'

It did not close down 10% from the highest close.... so why is it 'official'?

Based on the definition of "market correction" in my initial post, there is nothing that states it is based on the closing numbers. It is defined as a "drop of at least 10% in one of the market indexes" which is what happened today. At least one of the indexes dropped 10% from it's high.

 

[Dawg52]

Looks like it will be official by anyone's definition very soon.

 

[Bigritchie]

I actually watched it some today.

It dropped about 350, recovered, dropped to almost 350, then recovered, went in the green for about 1 minute, everyone and wall street went nuts cheering, then it closed down a few points.