Financial Market Correction Continues

Last week I indicated that this month’s market conditions look very similar to last October’s conditions.  During the month of October 2014, the SP 500 had a correction of 9.8%.  So far, in the past two months the US market has had a correction of about 7% (the DOW has corrected 9% to date).  It is too early to tell if this is a warning of the market turning from bull market to bear market.  As a reminder from the report that I issued last October, historically the initial decline that starts a bear market ranges from 7% to 13%, with an average of 10.3% (dating back to 1900).  HIstorically, after the initial correction, the market gains back 78% of the initial correction.  Obviously, history may not play out in every situation, but it can be used as a guide in making decisions.

The August correction should finish soon, and we should have a stock market rally attempt in September.  If that rally attempt appears to be what I have described in earlier research as a “Dead Cat Bounce” (see blog release dated October 16, 2014), then it will be time to reduce risk as the market could be giving an early indication that the bull market is coming to an end.  Currently this bull market is in its 6th year and is the third longest bull market in US history.