First, thank you for repsonding to my post. Most people do not for some reason, but I usually plug right along until I receive responses.
I agree that a return to the 200 day MA would be a healthy and realistic correction. I think that once market liquidity dries up back to what can be considered more "normal" levels, I think the market will then be primarily sentiment driven which can continue to move the market up for a period of time. However, once liquidity leaves the market, volatility will take its place and this is where the potential for a more major market correction will enter the picture.
I like your approach to the Japanese market. A true technicians viewpoint, where you observe low taxes, and low interest rates, but the market remains weak. Thisis comparing the values of significant economic indicators with the result in the market to see a disparity. I agree with this observation of yours. Also I agree that the relationship of the dollar to the yen can impact Japans ability to compete in the U.S. market in their current economic situation, so this will definitely be an issue with them.
In this current market, I think we will end up seeing a correction to the 20 day MA. Worst case is a correction to the 50 day MA of key indices, particularly concerned with the S&P 500, since as long as this liquidity driven market is controlled by fund money I think the S&P 500 is the key index to watch.
As far as the need for a significant market correction, I would rather a market climb a "wall of worry" than bounce along a path of exhuberance. So I agree that a good market correction with a period of consolidation would help set the stage for futher significant gains in the market that involve less risk to the market player, which will have both its direct and indirect economic benefits.
Good to hear from you!
Bob Graham |
