Stock Market Correction is Imminent
Nov 26, 2013 All major US indices have reached an important milestone on the close of trading day. Dow Jones closed at 16072.80, S&P at 1802.75 and Nasdaq at 4017.75.
TLT, a fund of US treasuries keep setting higher lows and getting ready for a big bounce by pushing the interest rate down. It would happen based on panic from the investors. Since stock market rallied, investors and speculators do not care about safe heaven assets like US treasuries or gold and other precious metals. For speculators, they want to go with the flow by keep buying the overvalued stocks with the greater fools theory.
There is no surprise if we see a correction of about 20% from the current market levels. S&P 500 200 Days SMA (simple moving average) is at 1647.31 which is around 10% below the today's close. The market is overdue for a correction. When Fed stops its bond buying programme, it would create adverse result on the stock market which will make investors to move towards safe heaven assets like US treasuires, Gold and other precious metals.
US$ is very strong for the last couple of months with the anticipation of Fed Tapering. US market is the leading indicator to rest of the world excluding Japan. When US is done with Tapering, then it is the time for other countries to follow the same which will put great pressure on the greenback by triggering hyper inflation in the coming years.
The market may continue to move higher with bigger fool thoery however if you are a long term investor, then it is safe to get out of the market and move your cash position into safe heaven assets like Gold and US Treasuries.