Stocks are being sold for reasons external to their real value – in this case leveraged
players caught by a falling stock market, a falling currency, and panicking unit holders.
This is a good time to be buying.
Could this develop into a major bear market? Well, everything is possible, but my judgment
says no. More likely we are simply in a correction that could run out to 15-16%,
the latter being the 5400 level. I don’t believe the market will rebound as hard out of
the fall as it did last year, but it is certainly offering some good longer term investment
opportunities and some good short-term ones. Much better than July!
The correction has the potential to last several more weeks, maybe into early September.
September 18 is the next US Federal Reserve meeting and should all hell have
broken loose, rather than simply the usual 10–15% correction, the Fed will probably
drop interest rates. I think Bernanke will prefer to be somewhat slow about dropping
interest rates. Greenspan is criticised for being too quick off the mark; Bernanke is
very keen to establish his anti-inflation credentials. The US CPI is hovering in the upper
range of the Fed’s preferred band and the US dollar is at 16 year lows, so Bernanke
will be watching the currency as well given that a weak currency can transmit inflation.
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huntleys view on the correction
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