March 30th, 2009
A little over a week ago, on March 20 in “Financial Stocks are Laggards“, I wrote:
“I believe these stocks [financial stocks] will soon reverse direction again and the inverse spikes (the falling knives) will morph into the leading edge of some sort of better defined bottom reversal patterns.”
While today’s 3.48% drop was led by those financials, it is also the correction described in “Time to Take A Break” last Thursday. I know today’s decline is uncomfortable, painful and gnaws away at self-confidence but there’s nothing to suspect that the reversal is in jeopardy (for those who have come around to believing that March 9 was the bottom or very close to it).
As a matter of fact, more than 12% of those stocks actually increased today and, as you would expect, half outperformed the S&P 500 while the other half performed worse.
How far or how long will this correction be? My guess is 5-10 trading days and another 5-10%. I base this pure speculation on the my guess (as indicated in the chart in last Thursday’s post) that the 2002-03 will act as support this time around.
Unfortunately, I’m joining the Snowbird migration by driving back North over the next 3 days. I’ll be catching up in the evenings but probably won’t have time to write. We’ll catch with you on Friday. I asked that you not buy stock as the market was careening downhill last year. Today, I’m asking you to not lose faith in this market.