This sell-off had to happen
by Peter Switzer
So this is how a stock market pull-back happens — there will be a trigger, such as a violent protest in Spain over austerity, and there will be some economic data stating the bleeding obvious, that the global economy is slowing, and Wall Street will have the worst day in months.
But these are only excuses for what I have been tipping would happen – the market junkies call it profit-taking – and why wouldn’t short-term traders try this stunt? Take Germany for example, where the stock market is up over 20 per cent since early June — you’d be mad if you didn’t say “thank you, I’ll get out while I’m long way ahead”.
But they will be back when the market falls because the good news versus bad news battle is still favouring the good’uns and that’s why I expect a sell-off but not a correction of 10 per cent or a 20 per cent crash. Forget that stuff, right now.
Yesterday, I wrote — wait for the fall, buy on the dips and profit — and that’s what a long-term investor does but the short-termers will sell, wait for the dip, buy and profit. It’s more nerve-wracking but can be good for making money, though you can mistime things!
The Dow ended down 101.37 points or 0.75 per cent to 13,457.55 while the S&P 500 gave up 15.3 points or 1.05 per cent to finish at 1441.59.
Spooking the market was protest in Spain against austerity measures and continuing worries about their debt issues and their failure to call for a bailout.
Against this there was some good economic news out of the USA with home prices up for the sixth month in a row plus consumer confidence in September hit the best level in seven months.
I want to see a few months of these kinds of improving economic reads and then it might happen that QE3 could prove to be the circuit-breaker that starts to turn around the US economy. Then we have to hope the European Central Bank (ECB) and the European Union (EU) leadership can pull off a similar economic turnaround story.
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Published on: Wednesday, September 26, 2012
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