Has the long awaited correction finally come? Is the Bull Mkt Top in?
I am not sure if there isn't one more strong push to try to make new highs left. But I am pretty sure a correction of at least 10% has begun. August is usually not a great month for stocks historically.
As the market had made its new highs, the % of stocks following along had continue to drop. The VIX did not show any fear at the new highs, so there was plenty of complacency and there certainly was not any wall of worry to climb. No bull mkt let's all ride for free like this seems to have most of the way except at its early inception back in 2009.
My own indicators have signaled extreme caution as they have risen to new extremes, but a sell signal has not been given. Nothing is full prof, but the backdrop now has then FED backing away in its bond purchases and we are into our 5th year of zero interest rates. It is interesting the FED continues to signal this policy will continue for a long period of time even as we reach employment goals they had set out and recent GDP showed 4% robust growth. What's the worry still ?
My worry, is and has been, that continued market and interest rate manipulation will have its backlash day. And as valuations have risen to near extremes, It points to me it may be time to switch to a more defensive strategy.
I agree is does not make any sense to try and time a 10% correction! or any correction in an ongoing Bull Mkt, but when one starts to show its age, when a Bear Mkt is upon us, declines will exceed 20%.
With the FED already sitting at zero rates , I also worry when the time comes to assist the market and economy, they will be sitting there with no arrows to shoot!