Market (Technical) Update

The stock market recently underwent a 10.2% correction. This May/June 2012 correction was normal for this “technical bull market” that we have been experiencing since the bottom of the last bear market crash (March 2009).  The previous corrections were 9.1%, 9.1%, 7.4%, 10.4%, 10.2%, and summer corrections of 22% and 17%.  It appears that this correction is over, and the market should continue to march higher with the ever present “wall of worry”.  Bull Markets generally inch up over periods of time, but they are customarily marked by times of worry, of which we currently have plenty.  These Bull Markets have had consistent similarities:  worries of a return of a bear market, mixed economic data, some glaring weaknesses in the economy…and overseas issues.  On a given day, the news media may call for 15,000 on the DOW, which is followed by a few weeks of selling;  then they start calling for DOW 10,000.  I have seen this pattern occur this year.  From my view, all of the worries exist justifiably.  They eventually will mark an end to a “bull market move”, however, so far, it does not look like 2012 will be the end.    Can the markets break down? Sure, but so far they continue to slowly churn on towards the 13,500 to 14,000 mark.  Unless something unforeseen (in stock market terminology a “Black Swan”) occurs, 2012 continues to look okay.  We continue to buy investments with superior fundamentals, and we are staying away from international investing.  Short term bond funds that we use are working well in this environment.  We continue to monitor “Black Swans” (random, unforeseen events; in 2008 it was the Lehman failure), but have not seen anything in the U.S. yet that could cause a prolonged bear market to start.   Currently my view is that the market stays generally stable through this year and on into next year.  The latter part of 2013 currently has me “technically” concerned.  If this forecast moves into 2012, we will report that.

We hope our IAP clients and friends are enjoying their summer and family vacations!