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Preparing For A Market Correction In March Or Early April?
Perspective | 26 February 2013
By: Daniel Loh
Articles (40) Profile

On 7th January, we issued an article, “US Market In Super Drive Mood, What Is Next?” providing our views that the stock market will be going higher because of lowered earnings expectations in the fourth quarter. We also mentioned that short sellers would be crushed in this rally.

This is the link to the article:

In February, we predicted that stock market might go sideways as the Dow Jones Industrial Average will find difficulty crossing the all time high of 14,198 points. Everything seemed to be panning out as what was expected. From early February till yesterday, the Dow increased by a miserable 140 points, a pale performance in comparison to the 750 points move in January. The Straits Times Index (STI) has of course benefited from this US recovery ever since resolving the fiscal cliff issue. The index has gained more than 300 points since last November after the US election.

We have been quite good in our forecast of the stock market direction  so far because we keep track of our US market sentiment indicator closely. Last Friday, we monitored our sentiment indicator and found out that a couple of US major sectors had turned bearish. Take a look at our market sentiment indicator in the link below.

Healthcare sector and Energy sector have both turned bearish last Friday, 22 February 2013. This serves as a caution for us to cut down on our exposure to long positions  and reiterates our view that the market may be in for a consolidation in March or early April. If the Standard & Poor’s 500 stocks, Technological sector or Energy sector turns down too, it will really signal the end of this magnificent bullish run.

Market moves in cycles. As an investor,the next few months may present a big opportunity for us if the market falls! Buying at the current high point can only make us a small token now but buying at a correction bottom is the key to great gains.

Our Trading Advice:

1) For those who still have a lot of long positions and are short term traders, our advice is to profit take some of it.

2) For those who invest long term (two to three years), get ready to buy some when your stock falls.
3) For those who have the patience and cash and are not in the market yet, you will have your chance three months later.
3) For those who still wants to go enter, select individual stocks carefully.
4) For those who wants to insure your portfolio, start to locate some stocks good for shorting or some defensive stocks good for hedging.

To me, Friday’s 100 points move in the Dow may be just an illusion. This market needs a catalyst for a downside move. Take note of this Friday’s ISM or next Friday’s employment reports like Non Farm Payroll. Let us see if that is the catalyst the market wants for the fall.


FREE Investment Seminar:

TOPIC: << How do you make Money when the Market turns down? >> 

You will learn:

- What kind of stocks would give you a hedge these few months?
- Strategies to know when the market will drop and how do you spot the BOTTOM?
- What kind of sectors you should watch out for THIS year.
- Market issues that US need to tackle in March
- How do you make a Consistent PASSIVE Income in Trading?

5 Mar 2013, Tue   7pm – 10pm   (English)
6 Mar 2013, Wed   7pm – 10pm   (Chinese 华文)
Speaker: Daniel Loh
Venue: 141 Cecil street, Tung Ann Association Building
#07-02 S(069541),
Tanjong Pagar MRT exit G, walk straight 80m, opposite traffic light
To register, pls  SMS <Name><Email><HP><Date><Number of seats> to 93676623
DANIEL LOH is an investment coach that specializes in equities and derivatives trading. He regularly appears on TV financial programmes like “Morning Express”, "Good Morning Singapore" and "Hello Singapore". He is interviewed bi-weekly on radio station FM95.8.

Please click here for more information about this author.

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