Stock Market - US Stock Market Correction Ahead!
Aug 30, 2013 - S&P 500 closed today at 1632.97 which is about 25% above its 200 days EMA (moving average) of 1312.64. It shows that we are in the very strong bull market however this point may also be considered that we are getting very close for major market correction.
The increase in home prices for the last over 14 months is because of the low interest rate and low inventory in the market. Homeowner with mortgage value above their home prices are still high but it is going deep south for the last two years. Now Fed may get a confident that banks will have enough cash balance, even if home owners with negative mortgage equity entering into default.
Besides employment growth and inflation rate are the other main factor when Fed can tart tapering its bond buying programme. Everyone knows that it is going to happen but the only question is when? It may happen as soon as next month. When the news is confirmed, then the US$ will its peak and start moving down. Since there is no more room to rally for US$. It is going to be great advantage of Gold.
Next week (Friday Sep 06, 2013) unemployment report is key factor on determining when the Fed can slow down or stop buying the bond / MBS (Mortgage backed securities).
Since the interest rate is going to spike, eventually that can lead a big correction for US stock market. BTW, home prices will start stabilizing from that point and making a big pause in appreciating its value. Since school begins in september, home buying would be very slow towards the winter and early fall season.
If you keep your money in US$, it is good. Now you can consider converting into Gold or other undervalued currencies such INR, AUD, EUR, etc. Still if you more conservative, then you can be happy with higher interest rate for US$ offered by US banks once Fed stops its bond buying programme.
Stronger dollar will hurt the profit of US export companies, especially Nasdaq, is overdue for a major correction.