Market Update

The market has officially gone into oversold mode, but it would look like the correction could last a bit longer. Markets can remain overbought and oversold for long periods.

One thing is for sure. Normal market volatility has returned, and the complacency of the last eight months is gone, and we can expect more wild swings as the market continues to correct in the real estate and mortgage markets.

The original guess was a 10% correction, which was actually needed by the market in order to clear the mechanism and allow the market to move forward.

At first blush the market may well move back to 1340 on the S&P 500 to 11,510 on the Dow. Those would be normal bounce points, but this may not be a normal correction, based on the triggers. Since many assets are now re-pricing based on risk factors, we may not stop there. Those levels would be 50% retracements of the current rally.

On the other hand, if the market were unravellings, we would see commodities imploding, and that is not happening. Stay tuned and we will start watching for early announcements on corporate earnings which would signal a serious market reversal.

Also note that once we do reach the bottom, we have a fairly large air pocket of no resistance to the upside, so a reversal should proceed quite nicely.