Market Correction

When I did my “Outlook for 2011” paper, I did so thinking that a stock market correction would occur sometime during January. I therefore did not want to make any equity changes until that happened. As I waited, the technical factors of the stock market appeared to grow weaker, with the number of stocks above their 10-day and 30-day moving averages dropping. Short term demand also seemed to be dropping. Both of these are signs that the market was becoming more selective and was losing momentum. It was clear that a shortfall of earnings or a change in world affairs could have a marked impact on the market. The unrest in the Middle East may be just the thing to instigate the market correction. I believe that the correction could be in the area of 5% to 7% from the S&P 500 current high of 1299. I would not sell equity investments already in place (because I could be wrong) but I have been unwilling to add to equity positions for our clients until this occurs. I still believe that, barring a major incident or a reversal of economic news, we are in a bull market that will progress much farther. Ed Mallon