Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market in Correction Mode

Stock-Markets / Stock Markets 2013 Apr 19, 2013 - 07:58 AM GMT

By: Puru_Saxena

Stock-Markets

According to our methodology, Wall Street is currently in ‘correction mode’ and additional near-term selling pressure cannot be ruled out.  At this stage, nobody can predict the duration or depth of the ongoing stock market correction.  However, until a new uptrend emerges, caution is warranted and investors should not allocate fresh capital to common stocks.


It is notable that after an impressive advance during the first quarter, Wall Street has recently experienced some distribution days (declines on rising volume) and a couple of days ago, our trend following system gave us the correction signal.  Thus, as long as the stock market remains in ‘correction mode’, we plan to stay defensive and will refrain from initiating new positions. 

Looking at the bigger picture, it is notable that Wall Street is outperforming the majority of the global stock markets and we expect this trend to continue for several years.  You will recall that between 2000 and 2011, the correct trade was to go short the US and buy commodities and the emerging markets. However, we suspect that trade has now reversed and for the next few years, investors should buy American assets and go short commodities and the stock markets of the developing world.  After all, America’s housing market is now on the mend and the world’s largest economy is still home to some of the most successful corporations on the planet.  Furthermore, sentiment towards America is still very negative and we believe that the stage is now set for a secular bull market on Wall Street. 

Given the fact that the stock market is currently in ‘correction mode’, investors should monitor the strongest sectors carefully and identify leading stocks which should be purchased after the end of the ongoing pullback.  As we stated last week, biotechnology, consumer staples and healthcare are amongst the strongest industry groups and investors should focus on these areas for new opportunities.  In terms of the laggards, commodity producers, chemical companies, oil & gas royalty trusts and precious metals miners are some of the weakest sectors and they must be avoided at all costs!

Turning to commodities, the picture is deteriorating and the Reuters-CRB (CCI) Index has now slipped to a multi-month low.  Furthermore, the CCI is now trading well below the key moving averages and this implies that commodities are in a downtrend.  Looking at specifics, the price of copper has now declined to a 52-week low and further weakness may bring about a waterfall decline.  In our view, major support lies in the $2.80-3.00 per pound area and a close below that level may trigger a dramatic plunge! Thus, experienced traders can consider going ‘short’ copper and the associated miners.  Elsewhere, the price of crude is also exhibiting weakness and a close below the $84 per barrel level will probably unleash a wave of selling.  Thus, investors should avoid investing in the energy complex and nimble traders can consider going short crude oil.     

Over in the precious metals patch, the prices of gold and silver plummeted last week and this disaster show was in line with our expectation. As you will recall, we sold out of precious metals in September 2011 and were continuously warning our readers about the possibility of a major plunge beneath the key support levels.  As things stand today, precious metals are trading below the major consolidation zone and prior support will now act as overhead resistance.  Given the magnitude of the decline, a brief bounce towards overhead resistance (US$1,440-1,500 per ounce for gold and US$25-26 per ounce for silver) cannot be ruled out but we suspect that any rally will fail and prices will probably fall below the recent lows. Thus, if we get a relief rally, nimble traders can consider going short gold and silver.  In our view, the secular bull market in precious metals is now over and this is not the time to have any exposure to gold, silver or the associated miners.  Remember, opinions are often wrong and the price never lies.  Therefore, we urge our readers to ignore the bull market hype and follow the price action, which is now decidedly bearish.

In the world of currencies, it appears as though the US Dollar is gathering momentum and it is conceivable that we may be in the early stages of a multi-year uptrend.  After all, the US Dollar is currently trading above the key moving averages and a close above the 84.1 level will probably usher in the next rally. Thus, as long as the US Dollar Index remains in an uptrend, investors should keep their cash in the world’s reserve currency.  Conversely, nimble traders can consider going short the Australian Dollar, British Pound, Canadian Dollar and the Euro.

Finally, over in the bond market, it appears as though German Bunds and US Treasuries bottomed out in March and they may appreciate over the following weeks.  Thus, nimble traders can consider establishing long positions in these safe haven assets.  Elsewhere, due to the loose monetary policy, high yield corporate bonds are holding steady and in our view, income-seeking investors should maintain their existing positions.

The above ‘Weekly Update’ was sent out to Money Matters subscribers on 19 April 2013.

Puru Saxena publishes Money Matters, a monthly economic report, which highlights extraordinary investment opportunities in all major markets.  In addition to the monthly report, subscribers also receive “Weekly Updates” covering the recent market action. Money Matters is available by subscription from www.purusaxena.com

Puru Saxena
Website – www.purusaxena.com

Puru Saxena is the founder of Puru Saxena Wealth Management, his Hong Kong based firm which manages investment portfolios for individuals and corporate clients.  He is a highly showcased investment manager and a regular guest on CNN, BBC World, CNBC, Bloomberg, NDTV and various radio programs.

Copyright © 2005-2013 Puru Saxena Limited.  All rights reserved.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in