# When do you expect the next Correction?



## YOUNG_TRADER (27 December 2006)

This Poll is very simple, we have had a stellar run since October, so when do you expect the next correction as the oct one never happened?

There will be alot of painful memories of May!


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## Jay-684 (27 December 2006)

May? 

I dont really know but hopefully when it arrives I'll have plenty of cash to buy up


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## michael_selway (27 December 2006)

Jay-684 said:
			
		

> May?
> 
> I dont really know but hopefully when it arrives I'll have plenty of cash to buy up




After May

thx

MS


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## YChromozome (27 December 2006)

Friday?


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## nizar (27 December 2006)

Sell in May and go away.
May 2006 has scarred me for life...


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## theasxgorilla (27 December 2006)

I don't like making predictions as I work off the premise that you trade what is in front of you...however, IF you believe Merriman cycles analysis we should see a minor low (the conclusion of a correction) between March and May. It's likely to be closer to March, as this is where the 50 week and 22-month cycle co-incide.

The big one to look out for though (9-year cycle) will be October 2007.  This will co-incide with the 10 year aniversary of the Asian currency crisis and 20 year anniversary of Black Monday.

Thats it, I'm outta tea leaves.


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## petee (27 December 2006)

thinking we will see a major correction in the early new year on wall street and the rest will follow suit..its way overheated in my opinion like a balloon..my opinion only..DYOR


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## ducati916 (27 December 2006)

In the US..........January

jog on
d998


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## wavepicker (27 December 2006)

January

Cheers


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## yogi-in-oz (27 December 2006)

Hi folks,

XJO ..... should be strong over the next 8 weeks,
particularly from 15-21022007, then the first signs
of a correction should arrive, around 07 March 2007.

Mostly down in April & volatile trading May-thru-September,
then a stronger market, around mid-October and a good
market, in early-December 2007.

More detailed astroanalysis on XJO, in SPI thread, 
as the year progresses ..... 

Strong sectors should be consumers discretionaries
and energy ..... spec stocks, gold, racing and gaming,
booze-FGL, publishing, travel, oilers ... more later. 

happy days

 yogi


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## mhtrieu (4 January 2007)

Hey People (Nizar in particular), 

How bad was the market correction in May? I didnt trade until November, so i dont know what really went on. What kind of stocks did u have during May?

Thanks


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## wayneL (4 January 2007)

With Copper *- 7.3%*
Crude* - 3.7%*
and precious metals struggling...

A correction could be imminent... in the resources sector anyway.


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## nizar (4 January 2007)

mhtrieu said:
			
		

> Hey People (Nizar in particular),
> 
> How bad was the market correction in May? I didnt trade until November, so i dont know what really went on. What kind of stocks did u have during May?
> 
> Thanks




From the stocks i held.
KZL from $4.70 to $2.89.
OXR from $3.81 to $2.53
LHG something similar.

Others i was looking at.
ZFX from $13.50 to $8.00.
CBH from $0.57 to 0.29.
PDN from $5.50 to $3.30.

SO yeh, pretty bad.


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## professor_frink (4 January 2007)

nizar said:
			
		

> Sell in May and go away.
> May 2006 has scarred me for life...



What was it exactly that was so scary about May Nizar? 

It took less than 5 weeks to find a bottom and wasn't big enough to drag the market into the red for the year. In all of those stocks you mentioned, you would still have been ahead for the year when the June lows were made.


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## nizar (4 January 2007)

professor_frink said:
			
		

> What was it exactly that was so scary about May Nizar?
> 
> It took less than 5 weeks to find a bottom and wasn't big enough to drag the market into the red for the year. In all of those stocks you mentioned, you would still have been ahead for the year when the June lows were made.




It just shocked me.
Before that, i thought all stocks did were go UP!


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## professor_frink (4 January 2007)

nizar said:
			
		

> It just shocked me.
> Before that, i thought all stocks did were go UP!



Fair enough. First lessons are usually the hardest. At least you know what you can expect next time it happens, which could be quite soon


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## Morgan (4 January 2007)

The "market" doesn't really care when I think the next correction should be.
I will let my super funds worry about that and take care of all the "boring/safe" stocks.

For my small trading funds, I will play with the more "interesting" stocks.
However now have the helmet in place should the sky fall on my head- stop losses on all the stocks that I own.
"Buy gains" on the stocks that I would like to own.

Was stopped out of my favourite stock yesterday (PDN) but then that's what stop losses are for- to stop you becoming emotionally attached to a stock.


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## Sean K (4 January 2007)

Today! 

My head hurts. 

I'm going to the pub.


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## marklar (4 January 2007)

kennas said:
			
		

> Today!
> 
> My head hurts.
> 
> I'm going to the pub.



Was just thinking the same thing...

m.


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## powerkoala (4 January 2007)

wow... 
i m going back to zzzzzzzzzz
already got hayfever and this is getting worse.......


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## Nick Radge (4 January 2007)




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## hitmanlam (4 January 2007)

I reckon it'll be May.  

Last years correction might play in the minds of investors.  It's all psychological.


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## Nicks (4 January 2007)

hehe today for me - but corrections are good, they take some steam out, and provide buying opportunities for discounted stock.


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## swingstar (4 January 2007)

Maybe end of January or Feb. I don't think last night / today is the start of anything yet.


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## Gundini (4 January 2007)

swingstar said:
			
		

> Maybe end of January or Feb. I don't think last night / today is the start of anything yet.




Maybe so, but wiped the smile off my face   

Holding BHP and WPL like the rest of the planet probably... Ouch!


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## Kipp (4 January 2007)

professor_frink said:
			
		

> What was it exactly that was so scary about May Nizar?
> 
> It took less than 5 weeks to find a bottom and wasn't big enough to drag the market into the red for the year. In all of those stocks you mentioned, you would still have been ahead for the year when the June lows were made.



Frinky if memory serves.... was one who played the correction one pretty well.  I'm pretty sure you were on the ZFX bandwagon but got out pretty quick, and I remember you saying that you "out of everything" by about May 18.  I was just too afraid to take a loss on stocks that were up 15-20% two weeks previously...

And for the bears like Wayne, I'm sure every correction presents an opportunity to make a make by shorting an overhyped Copper producer, or even in just shorting the indices.

It didn't scar me for life but it was good lesson to learn... at least stocks are liquid enough to get of any time you like.  In the property market it can be alot tougher...


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## Kipp (4 January 2007)

swingstar said:
			
		

> Maybe end of January or Feb. I don't think last night / today is the start of anything yet.



A weird part of me is kind of glad to have the odd red day... too many days on end of crazy gains (70+ points) is unsustainable and sets the scene for a correction.


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## scsl (4 January 2007)

Kipp said:
			
		

> A weird part of me is kind of glad to have the odd red day... too many days on end of crazy gains (70+ points) is unsustainable and sets the scene for a correction.



Tomorrow could be a more serious red day than today. The UK market is taking a battering, with stocks like BHP and RIO down 4.6% and 3.5% respectively... So unless the US markets do something extraordinary (which is probably unlikely seeing as last night's inflation news destroyed investor sentiment), we could see a drop of close to 2% tomorrow. That said, I think the correction's here!


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## brerwallabi (4 January 2007)

Well the UK now their lunchtime is a lot better then it was 2 hours ago.
Resource sector is down 2.95% in London.


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## Bobby (4 January 2007)

brerwallabi said:
			
		

> Well the UK now their lunchtime is a lot better then it was 2 hours ago.




What maladfoit phraseology.

Try reading your posts before posting.

Good Luck  :


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## clowboy (5 January 2007)

kennas said:
			
		

> Today!
> 
> My head hurts.
> 
> I'm going to the pub.




rofl


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## scsl (25 January 2007)

Any thoughts on when this will happen?


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## mmmmining (25 January 2007)

Early Feb


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## YChromozome (26 January 2007)

Could be soon. I imagine we would follow a US lead.



> NEW YORK (MarketWatch) -- U.S. stocks closed sharply lower Thursday, with the Dow Jones Industrial Average suffering its worst day of the year so far, as investors were shaken by a sell-off in the bond market, which sent long-term interest rates to five-month highs and fueled jitters about the housing market and the economy.
> 
> News of a sharp drop in existing home sales in December, together with the dire outlook from homebuilders, added to the selling pressure. See full story. The market has been betting that a stabilizing housing market would lead the economy to a soft landing this year.




Apparently existing home sales fell an annualised rate of 8.4% the largest annual decline in 17 years. If you add this to data coming out toward the end of last year showing the fastest falls in New House sales on record, then I guess Soft landing vs Hard landing is back on the agenda.

As many worldwide in countries such as the USA, UK and Australia are using huge unsustainable rises in RE not only as an increase for consumer confidence, but also using 'The Wealth Effect' and their homes as ATMs to borrow for consumer goods, we are witnessing double digit credit growth. The generation Y's who can't afford housing, they are pumping all their disposal income into the economy.

Its good because its flowing back into goods and services and boosting company profits, but unfortunaly is not sustainble. We are starting to see retail spending, building products and metals falling so you wonder if there will be any surprises come 6 monthly reporting season. . .  After all, they say Copper has a PHD in economics, it is used in piping, electrical wiring etc in houses, business and industry. Maybe Copper has something to tell us?


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## rustyheela (26 January 2007)

who knows!!! you cant control your profits, only losses so ensure your stops are in place and the rest will look after its self!!! 
they usually happen when u least expect.


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## Garpal Gumnut (28 January 2007)

I agree with you rustyheela. Who knows, watch and wait, it will come, be prepared if it does. Although it may not happen this year, it is in the nature of markets to correct and have bad bearish corrections. I've been through 87 and 97 and they came suddenly. I suppose if I were to place a bet on it, Oct 2007 would be the month and year I'd punt on. There is much euphoria now, heaps borrowing, margin loans at a high, cdf's make it easy to trade, many stocks are on the up and up. The old rogues who were on the boards of resource stocks in the seveties/eighties, and tech stocks in the nineties are now re-appearing on uranium and zinc boards. Everyone I know owns shares, the barber discusses it with me...etc. One must be wary. Tulips might be the next hot pick.  Garpal


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## IFocus (28 January 2007)

How about starting tomorrow

XJO Chart just hit Fib


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## CanOz (28 January 2007)

So whats the typical retracement?


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## CanOz (28 January 2007)

Always two sides to a coin.

WASHINGTON (AFP) - After a surprising show of strength in the US economy, the Federal Reserve is likely to keep interest rates steady at its upcoming monetary policy meeting to see if the trend continues, analysts say.

The Federal Open Market Committee, which meets Wednesday, is widely expected to keep its base rate at 5.25 percent, where it has been since August, when the panel halted a series of 17 consecutive quarter-point increases to stem inflation.

In addition, the central bank is likely to maintain its warning or "bias" toward another rate increase, which analysts say is aimed at keeping inflation expectations in check.




While most Fed-watchers see no change in the funds rate Wednesday, more significant will be the statement on the panel's assessment of economic conditions, which will provide clues on the Fed's next move.

Stronger-than-expected data has eased concerns that the economy might slip into recession. At the same time it has diminished prospects for a rate cut that might be needed to stimulate activity, say economists.

"The problem for the Fed is that the FOMC meets (this) week and they have these strong housing data and even better general economic numbers to contend with," said Joel Naroff of Naroff Economic Advisors. "The slowdown they had been pointing to is no longer there."

John Lonski, chief economist at Moody's Investors Service said the Fed is starting to come to grips with a stronger economy.

"If anything, the likelihood of a change in Fed policy is now shifting from a rate cut to a rate increase," Lonski said.

Even though the labor market is tightening and boosting wage inflation pressures, Lonski said that "the idea of a rate hike cannot be taken seriously until the uncertainties surrounding housing have been sufficiently resolved."

In the past few weeks, even the most bearish analysts have been upgrading their forecasts from a gloomy outlook to one that shows steady and moderate growth for the fourth quarter of 2006 and early 2007.

Data in the past few weeks showed US employers added a healthy 167,000 new jobs in December, while the housing market, the main source of economic weakness, appears to have stabilized.

New home sales rose 4.8 percent in December, defying expectations of weakness and US home resales slipped 0.8 percent, leading some economists to suggests that the worst of the housing slump is over.

Deutsche Bank chief US economist Joseph LaVorgna, who a month ago had projected zero growth in the fourth quarter, is now considerably more optimistic.

LaVorgna now sees fourth-quarter growth at a 2.3 percent annualized pace and a 1.8 percent expansion in the first quarter of 2007.

"Since early December nearly every one of the major monthly economic indicators that we track was stronger than expected," he said.

Lavorgna said he still believes the Fed will cut rates, but later than he had earlier predicted and not as much.

"We have pushed our forecast for the timing of the Fed's first rate cut to the second half this year," he said. "As a result, we now see the Fed cutting rates only 50 basis points, not the 100 basis points we had thought before, when the economy looked like it was ready to crack."

Other analysts say the economy is even stronger, and that the Fed may have to consider hiking rates instead of lowering them.

Citigroup chief economist Lewis Alexander sees overall economic growth for 2007 at 3.1 percent.

"Despite the crash in housing, the US economy overall remains set for a soft landing, with average growth in the 3.0 to 3.5 range in 2007," he said.

"Corporate finances overall are in good shape, financial conditions are slightly accommodative, job growth remains healthy, and lower oil prices are lifting real incomes. Second, housing demand already shows signs that the worst of the downturn has passed and the imbalance between demand and supply is starting to ease."

Beata Caranci, senior economist at TD Bank Financial Group, said she sees the Fed holding rates steady for an extended period.

She said consumer spending remains strong, keeping growth on track despite weakness in housing.

"Consumer spending growth will remain partially shielded from deteriorating wealth effects, and the economy will track a reasonably healthy, but still subpar 2.5 to 3.0 percent quarterly pace, before accelerating into 2008," Caranci said. 

"In this environment, the Fed is unlikely to feel any urgency to cut rates."


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## theasxgorilla (28 January 2007)

CanOz said:
			
		

> So whats the typical retracement?




That's the thing!  The way it's been drawn it's an extention of a retracement that is actually an extention.  I see how it lines up at the 161.8% level, but I'm not sure what it means.


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## Garpal Gumnut (28 January 2007)

Fibonacci Retracements are displayed by first drawing a trendline between two extreme points (i.e., a significant trough and peak).  After selecting Fibonacci Retracement from the Insert menu, a series of up to nine horizontal lines will be drawn at the Fibonacci levels of 0.0%, 23.6%, 38.2%, 50.0%, 61.8%, 100%, 161.8%, 261.8%, and 423.6%.  
After a significant move (either up or down), prices will often rebound and retrace a significant portion (if not all) of the original move.  As the price retraces, support and resistance levels will often occur at or near the Fibonacci Retracement levels.

Dear gorilla,  This is from MStock interpretation of fib retracement.    Garpal


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## theasxgorilla (28 January 2007)

Indeed...but what the chart shows is an extention measured as a retracement, which is kind of odd to me...not to say it's not useful, just that I don't know how to interpret it.


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## IFocus (28 January 2007)

“So whats the typical retracement?”

Sorry CanOz the crystal ball is on the blink

“That's the thing! The way it's been drawn it's an extention of a retracement that is actually an extention. I see how it lines up at the 161.8% level, but I'm not sure what it means.”

Gorilla it just means to me that price may react to the level, given the last candle that raise’s the possibility a little. What will happen? No idea the market will do what it wants.

Focus


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## Garpal Gumnut (28 January 2007)

Agree, I think the extension developed from Elliot's use of it in  extending his 5th wave. The son of Bonacci would probably be twirling in his grave but the extension to now would be a bit eerie should something happen to cause a crash next week.    Garpal


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## CanOz (28 January 2007)

IFocus said:
			
		

> “So whats the typical retracement?”
> 
> Sorry CanOz the crystal ball is on the blink
> 
> ...




I think this would be a good time for Nick to post the latest chart on the XJO from his website.

He may have done so already in another post. 

Enough said.

Cheers,


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## coyotte (28 January 2007)

Quote by Glenn Neely 

" No matter how good I got at wave theory , my trading was good some of the time and not  good some of the time, " Neely explains. "The world of forecasting is is completely different from trading. To get good at trading you basically have to give up the forecasting business. That was a profound revelation for me because  my whole career, my whole life,  was founded on my ability to predict markets really well. "


Always Remember :
 You don't need to know what will happen next 

Cheers
Coyotte


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## wayneL (28 January 2007)

coyotte said:
			
		

> Quote by Glenn Neely
> 
> " No matter how good I got at wave theory , my trading was good some of the time and not  good some of the time, " Neely explains. "The world of forecasting is is completely different from trading. To get good at trading you basically have to give up the forecasting business. That was a profound revelation for me because  my whole career, my whole life,  was founded on my ability to predict markets really well. "
> 
> ...




So true.


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## nioka (29 January 2007)

If May 2007 is as good for me as was May 2006 I will be happy. It is all in the choice of stocks and whether you are investing or dealing in them. 
 There are plenty of stocks which can stand a general market fallback. Take AGM for instance. It will be more profitable when production commences and will still be profitable even if the price of nickel falls dramatically. Take ADI it will surge if Sugarloaf proves profitable,regardless of the general market trend. CML and WOW will continue to trade profitably and are safe havens. 
It is the speculative uranium stocks which I believe will be hit hardest especially those which haven't a chance of getting into production in the near future. 
Those with fully leveraged stocks receiving calls will suffer in any reversal.
On the positive side there is a steady stream of super funds looking for a home and these will even things out. 
 Nobody should have to worry too much in the next year or so unless they take high risk options trying to get rich too soon(which can happen during the best of times).
Summing up. Things are OK. Expect minor corrections regularly. A major one,in my opinion is some time off.


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## Garpal Gumnut (4 February 2007)

nioka said:
			
		

> If May 2007 is as good for me as was May 2006 I will be happy. It is all in the choice of stocks and whether you are investing or dealing in them.
> There are plenty of stocks which can stand a general market fallback. Take AGM for instance. It will be more profitable when production commences and will still be profitable even if the price of nickel falls dramatically. Take ADI it will surge if Sugarloaf proves profitable,regardless of the general market trend. CML and WOW will continue to trade profitably and are safe havens.
> It is the speculative uranium stocks which I believe will be hit hardest especially those which haven't a chance of getting into production in the near future.
> Those with fully leveraged stocks receiving calls will suffer in any reversal.
> ...




I feel May and June 07 will be huge bull months in the asx as seniors grab their tax free inputs to super. The ASX 200 i feel will nefit the most with the top 20 experiencing bullish advances. this I feel will occur even if Wall St. , Nikkei and other markets tank. Garpal


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## tech/a (5 February 2007)

wayneL said:
			
		

> So true.




Agree with both you and coyotte.

The main advantage I see is the ability of knowing WHERE you are when taking or exiting a trade relative to both longer and shorter term analysis.

Trading a corrective move (If recognised) isnt the best option.
Exiting a bullish move during a pause (rather than a correction) could leave a lot of profit on the table.

Holding a position and not recognising that the last bull run was the end of a major wave can result in the same scenario.

Its just analysis---because it has a method of measurement forward doesnt make it less valid that those that are based upon hindsite statistics.

Rather than seeing it as tops and bottoms see it as the point your at on the map at that moment in time.

This form of analysis should be read in conjunction with other confirming analysis. The goal is to maximise opportunity both on entry and profit retention.


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## >Apocalypto< (6 February 2007)

the way it has jumped off the sep/ oct trend line a pull back is on the cards in my view its on a real vertical short term line now.

but will it be like that week in Jan or like May 06 that's up to the market to decide!

I say bring it on, new entry points!   :knightrid


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## Kauri (7 February 2007)

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## rico01 (7 February 2007)

I think it will be  about May 7/8 just after tradefest just like last year [12/5/06]when louise Bedford said "" Who,s not 100% invested in the market now ,It,s the most exciting time to be in it now!"" ,and you guessed it ,  that was the start of our correction last year. I don,t know if she,s invited back this year


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## >Apocalypto< (7 February 2007)

rico01 said:
			
		

> I think it will be  about May 7/8 just after tradefest just like last year [12/5/06]when louise Bedford said "" Who,s not 100% invested in the market now ,It,s the most exciting time to be in it now!"" ,and you guessed it ,  that was the start of our correction last year. I don,t know if she,s invited back this year




LOL that is great ha ha ha   , 

maybe she was short and it was all a stunt!

cha ching!!

on a serious note 

Today on the sanford options board:

XJO ASX200

calls traded 2238 Puts traded 8217 now that does not look so optimistic! Or am i missing somthing now it's reporting time?


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## wayneL (7 February 2007)

Trade_It said:
			
		

> calls traded 2238 Puts traded 8217 now that does not look so optimistic! Or am i missing something now it's reporting time?



Put/Call ratio is usually a contrarian indicator, but is useless on its own. I must be looked at in the context of its own history.

A better measure is the ratio of the total of all equity puts and calls. FWIW


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## >Apocalypto< (8 February 2007)

wayneL said:
			
		

> Put/Call ratio is usually a contrarian indicator, but is useless on its own. I must be looked at in the context of its own history.
> 
> A better measure is the ratio of the total of all equity puts and calls. FWIW




I understand what you are saying as that ratio is in favour of the uptrend as every one is writing puts!

but when so many puts are bought it also is saying something if it's just about even or 100 more to other side i don't think to much but when there are thousands more i take notice!


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## 2020hindsight (11 February 2007)

probably this saying is well known to experienced traders around here, but I post it anyway.
Alan Kohler on this morning's ABC Inside Business program... "with the surge tide, all boats rise.  But someday no doubt the tide will go out, and expose some of those boats with barnacles, and many swimmers without togs"   

(PS he didnt say whether he was still buying - or whether he was double-checking the chord in his togs for that matter.)


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## jemma (11 February 2007)

2020hindsight said:
			
		

> probably this saying is well known to experienced traders around here, but I post it anyway.
> Alan Kohler on this morning's ABC Inside Business program... "with the surge tide, all boats rise.  But someday no doubt the tide will go out, and expose some of those boats with barnacles, and many swimmers without togs"
> 
> (PS he didnt say whether he was still buying - or whether he was double-checking the chord in his togs for that matter.)




That saying is taken from Warren Buffet, 'when the tide goes out we will see who is swimming naked'. Great quote, I predict March as a correction.


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## Atomic5 (11 February 2007)

Isnt the traditonal investment cycle based on the saying "go away in May and don't come back until St Ledger's day". (I believe that St Ledgers Day is in late September.)

If you look at last year that is exactly what the market did. It has to do with summer holidays in the Northern Hemishpere, something you might not understand if you live in Australia and are never snowed in for months with cold mawing at your ankles. 

Once the sun's out, so is the money, out of the stockmarket .... better things to do ,.... ?!


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## 2020hindsight (11 February 2007)

April 1 maybe 
PS I notice 2% of votes say that the market will continue to go up indefinitely.
as they say, optimists may not be as accurate in their predictions  as pessimists, but they are usually happier. 

BUT - I guess if it gets to the point that 2% can't afford togs, then they maybe should prepare to lose their modesty.

As for the analogy to barnacles on boats left stranded at low tide - Isn't that what they do in Darwin anyway - saves paying slipway fees to do the antifouling. - Just as long as the tide comes in again!   

My own portfolio has certainly been through some "Darwinian" tidal ranges in the last 12 months.


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## krisbarry (11 February 2007)

I don't reckon we will get a correction till at least July. Look at the new super rules.  Squillions of dollars is going to flood the ASX over the coming 5 months.  Baby Boomers off loading investment properties and dumping bucket load of cash into super.  Ohh  what a lovely time to be in the market


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## Kauri (11 February 2007)

In the Saturdays West Australian....

     A growing number of investment fund managers and analysts are warning that Australia’s fast-running stockmarket is closing on another sharp correction which could wipe up to $200 billion from share prices. 

They say the market is heading for a correction of as much as 15 per cent, but more pessimistic experts fear another crash comparable to 1987 is around the corner. 

The market’s S&P-ASX 200 hit a record high yesterday and has now climbed more than 20 per cent since the last big correction sent it 11 per cent lower last May. 

The recovery has been buoyed by record liquidity, strong superannuation inflows, steady interest rates and relentless takeover activity. 

In the past month alone it has gained 7 per cent, including 1.6 per cent this week, valuing the broader market at $1.35 trillion. 

However, many financial players have turned bearish as the index closes on another key barrier, the 6000-point level. They cite concerns about widespread risk complacency and stretched share valuations. 

452 Capital co-founder and fund manager Peter Morgan likened the current climate to the lead-up to the 1987 crash. 

“If you had a timeline on it, you are going into 1987 but you are not yet in September 1987,” Mr Morgan said. 

“There are two things in the big equation, there is firstly a lot of liquidity both domestically and globally and, secondly, risk is being priced at a very low level ”” both those things are dangerous. 

“I don’t think it is a lot different to what happened in the 1980s, but the 1980s boomed for three or four years before the markets corrected.” 

Research by the Bank of Canada highlighted yesterday that the Australian equity market was facing a number of headwinds despite being supported by a strong commodity price cycle, a solid domestic economy and high-dividend yields. 

The bank said risks to the market included a possible commodity price downturn, higher interest rates and the expensiveness of Australian shares, saying they were now selling at the same price per earnings ratio as global stocks. 

Nomura Australia equity market strategists Eric Betts said the reporting season could be a “last hurrah”. 

“Once the reporting season is out of the way you will probably have crossed the 6000 barrier and people may take that as a time to reassess their positions,” Mr Betts said, adding that he expects a correction of 8 per cent to 10 per cent. 

“My prognosis for the market is that we could well have a pullback in the short to medium term of 10 to 15 per cent but I don’t think we will see the almighty collapses of the 1980s,” Argonaut Securities executive chairman Charles Fear said. 

However, Mr Fear warned that flatter commodity prices and rising costs could put pressure on the profitability of the big miners. 

Bell Potter Securities director of research Peter Quinton agreed that the Australian sharemarket was over-extended. 

“I am very much in the camp that we will get a correction, but I am equally in the camp that it will just be a technical correction of 10 per cent or a bitmore,” he said. 
TRACEY COOK


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## >Apocalypto< (12 February 2007)

“I am very much in the camp that we will get a correction, but I am equally in the camp that it will just be a technical correction of 10 per cent or a bit more,” he said.
TRACEY COOK

That's what I'm thinking!


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## Uncle Festivus (12 February 2007)

Correction any day now, just watch the DOW for clues I think


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## Bush Trader (14 February 2007)

Uncle Festivus said:
			
		

> Correction any day now, just watch the DOW for clues I think




Hi all

This chart demonstrates the loss of momentum and developing divergence

The question we mask ask ourselves has the relationship between the all ords and the dow changed, think back to the Sept Qtr where the relationship broke down to some extent.

*The following is an extract reported by FN Arena yesterday * 

"Credit Suisse holds the view, demand for Australian shares will outstrip supply significantly this year. The Broker even uses the term "unprecedented". The broker believes last year demand already outweighed supply, despite the large T3 offer, and this has pushed up the share market's performance into double digits again. This year the gap should be much, much wider. 
If Credit Suisse's calculations prove correct circa 4% of the total market capitalisation of Australian equities will be looking for reinvestment in the market this year. All these funds come from excess cash (paid out through dividends or share buybacks), mandatory superannuation (with changes in legislation adding more to the basket this year), corporate mergers and acquisitions, private equity deals and -not to forget- the government's Super Fund. 
Last year, the strategists argue, the overall PE for the Australian share market rose by 10%. Credit Suisse sees a direct relationship with the demand/supply balance. Considering the broker believes the imbalance for 2007 will be four times larger as in 2006, it would be easy to see the market PE to expand further this year. 
The fact that the bond market has now priced out any rate hike in the near term will no doubt contribute to such a scenario. 
There is, of course, a third scenario whereby share prices retreat to create room to move further upwards again.

At a time when several commentators are pointing out that underlying momentum in the US equity markets appears to be waning, and the market is starting to look "heavy", investors can possibly draw confidence from Credit Suisse's analysis that any possible weakness will make the overall market simply more attractive. "


Cheers


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## >Apocalypto< (16 February 2007)

Stop_the_clock said:
			
		

> I don't reckon we will get a correction till at least July. Look at the new super rules.  Squillions of dollars is going to flood the ASX over the coming 5 months.  Baby Boomers off loading investment properties and dumping bucket load of cash into super.  Ohh  what a lovely time to be in the market




very valid point


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## chansw (25 February 2007)

*Shares' show of strength*
February 25, 2007

http://www.theage.com.au/news/business/shares-show-of-strength/2007/02/24/1171734070237.html?page=fullpage#contentSwap1

The ASX200 has charged through 6000 points in a sizzling run - but where to from here? Richard Webb investigates.

PHEW, what a scorcher! No, not the weather, the sharemarket. Shares are up almost 6.5 per cent since the start of the year and at this rate are on track to post a monster 50 per cent gain for the year as a whole.

As anyone who has followed the sharemarket for any time will know, shares can't keep going up at 1 per cent-plus a week indefinitely.

Last time we had this sort of gain over a full year was in 1986-87 when the market put on 90 per cent in the 12 months to September before producing one of its biggest crashes a month later.

Actually, shares have been even stronger than these recent figures indicate as it was a pretty shabby start to the year ”” the market is up almost 10 per cent since the second week in January.

This is, of course, great for share investors ”” that's one in every two adults in Australia ”” and practically everyone else too, as most superannuation funds have investments in the local market.

But it can't continue. All good things must come to an end, right? The ASX200 has crashed through 6000 points and looks like staying there. Is it time to take a few profits? The answer from share experts is a resounding "no" ”” well, not yet anyway. But don't expect shares to keep heading up in a straight line either. Here's why.

While the sharemarket has bolted ahead recently, thanks in part to the billions of dollars of private equity money swirling around and which is now swooping on retail giant Coles, it has only just kept pace with company earnings. That's why shares are no more expensive than a few years ago and in some cases are cheaper.

Shane Oliver, AMP Capital Investors chief investment officer, says the sharemarket, even at its record closing high on Friday of 6036.1, sits on a prospective price-earnings ratio of 15.3. The 10-year average for this measure is 15.2 and the market hit 18.3 in 1999 at the height of the tech boom.

So we are at an average price level for the past decade relative to the profit of listed companies. That's certainly not expensive.

But there is one big rider to all of this. While these experts expect shares to post a solid gain for the year, they believe it will be closer to 10 per cent than the 20 per cent of the past three years. The main reason is the expectation that company profit growth will slow to about 12 per cent this year.

That means we are almost two-thirds of the way there yet we are less than two months into the year. This is when predicting where the sharemarket is heading becomes tricky.

Don Williams is chief investment officer at fund manager Platypus. He thinks the very strong and consistent bull market will continue but that does not mean we are not due a few corrections.

"We've tracked this bull market against previous bull markets and it's better than the one in the 1990s and not as good as the 1980s," he says. "But volatility has been significantly lower ”” we've had a very consistent 'up market'. We got a couple of 10 per cent corrections last year and we will get at least one of these this year."

When? That's the $64 question. Mr Williams again: "We all know there's going to be a correction but we can't quite figure out when. We've seen very impressive top-line growth in this current reporting season and the fundamentals for the sharemarket are as good as they have been, but there is nothing genuinely cheap out there."

CommSec chief equities economist Craig James agrees. "If shares are outperforming earnings in a big way, then that's when you should be really worried," he says. "But they haven't been. Even so, I think if we get a period of consolidation once these profit results are over, I don't think it would be a bad thing at all."

Michael Heffernan, senior adviser at Austock, says the recent bumper profits, continued run of private equity takeovers and takeover speculation, huge share buybacks from companies such as BHP Billiton and a strong economy have driven shares up. But he says the market cannot keep this up.

"While it's great while we are on the run, the market is not going to keep going up at 1 per cent a week like it has been doing so far this year," he says. "It might be like last year where we ran to 15 per cent by May and finished 19 per cent up at the end of the year."

Mr Heffernan echoes most of the other experts in saying there is nothing fundamental to worry about ”” just yet.

"The profit results have been absolutely fabulous," he says.

Rebecca Sullivan, retail strategy manager, ABN AMRO Morgans, says earnings expectations were high at the start of the reporting season, yet corporations had in the main delivered results above that and those that had not were generally one-off cases. "It's hard to find a sector that's struggling," she says. "Earnings have pushed this sharemarket higher and we see no threat to earnings at this stage. We expect the sharemarket to stay strong for the rest of the year; we are pretty comfortable all round about it."

Ms Sullivan says the sharemarket has "just been playing catch-up" in the past few weeks.

AMP's Dr Oliver says that of the 116 companies he tracks that have already reported their profits, a solid 48 per cent beat market expectations. Another 34 per cent were in line, with 18 per cent below. Companies' comments on profit outlook have been equally strong. "Of those companies that have made comments, 32 were clearly positive outlook statements against only seven that were negative," he says.

Dr Oliver expects profit growth overall will come in about 19 per cent year on year for the December half, against 17 per cent growth expected before the profit season started. "Company earnings expectations for 2007 and 2008 have been lifted by about 2 per cent as a result," he says.

So what next? Platypus' Mr Williams reckons the market could run another 200 to 300 points higher but then he expects a correction back below 6000. "Longer term, the market could struggle through the federal election with all the uncertainty it will cause," he says.

Austock's Mr Heffernan is looking for 6400 by the end of the year, but AMP's Dr Oliver believes we could approach 7000.

"We haven't seen any signs of the euphoria you get when a market gets near its top," he says.

"It looks increasingly likely that the sheer weight of money will push the sharemarket higher than earnings growth this year, and that means we could be pushing towards 7000 by the year end."

Now that might be a time to take a few profits.


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## CanOz (27 February 2007)

What does everybody think now, given the big selloff on the Chinese markets, and the XJO selloff in the last two hours?

Could this be the correction?

Cheers,


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## constable (27 February 2007)

CanOz said:
			
		

> What does everybody think now, given the big selloff on the Chinese markets, and the XJO selloff in the last two hours?
> 
> Could this be the correction?
> 
> Cheers,



doubt it .....more like a bit of profit taking after mondays stellar run.


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## CanOz (27 February 2007)

constable said:
			
		

> doubt it .....more like a bit of profit taking after mondays stellar run.




The run on Monday was on resources and energy...for the most part they were spared today from as much blood letting. Nearly 9 out very 10 stock hit the daily limit of 10% loss.

Cheers,


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## professor_frink (27 February 2007)

CanOz said:
			
		

> The run on Monday was on resources and energy...for the most part they were spared today from as much blood letting. Nearly 9 out very 10 stock hit the daily limit of 10% loss.
> 
> Cheers,



Dow is off nearly 50 and the S&P off 7.25. Still a long way to go before they open though.


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## CanOz (27 February 2007)

professor_frink said:
			
		

> Dow is off nearly 50 and the S&P off 7.25. Still a long way to go before they open though.




This is going to be messy, its got to be, every market is so toppy!

Have you got some good links where i can get the US indexes? I'm a bit isolated over hear....almost feel like getting a room at the Shangri La just to watch the carnage!

Cheers,


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## professor_frink (27 February 2007)

CanOz said:
			
		

> This is going to be messy, its got to be, every market is so toppy!
> 
> Have you got some good links where i can get the US indexes? I'm a bit isolated over hear....almost feel like getting a room at the Shangri La just to watch the carnage!
> 
> Cheers,



15 minutes delayed quotes from futuresource should do the trick-

http://www.futuresource.com/quotes/index.jsp

select from the top symbols list-it'll have most of what you're looking for


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## barnz2k (2 March 2007)

sorry for being a noob,
but would the recent drop be this 'correction' or are you refferring to just the Aus market. Is it like in relation to interest rates etc when they talk about an adjustment?

Maybe this General drop would at least delay a local correction?


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## CanOz (2 March 2007)

barnz2k said:
			
		

> sorry for being a noob,
> but would the recent drop be this 'correction' or are you refferring to just the Aus market. Is it like in relation to interest rates etc when they talk about an adjustment?
> 
> Maybe this General drop would at least delay a local correction?




We were speaking of a correction that started in China and went around the globe. The ASX we thought would be affected too. Not sure what you mean by adustment but generally they refer to the deep dips in the share markets uptrend as a correction. This has no relation to interest rates as such, at this stage, but could have if it evolves into a bear market and global recession.

Anything else feel free to ask stupid questions and i'll try not to give stupid answers. Lots of people here to explain things to newbies.

Cheers,


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## insider (2 March 2007)

Hey guys... how often do corrections occur? When was the last correction period? How long it last? I'm confused whether to sell or hold...


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## theasxgorilla (2 March 2007)

insider said:
			
		

> Hey guys... how often do corrections occur? When was the last correction period? How long it last? I'm confused whether to sell or hold...




Some food for thought...

I count 4 significant corrections during this bull run so far.  They have involved losses in value on the XAO/XJO indexes of between 4% and 10% and have lasted between 3 and 6 weeks, depending on their magnitude and velocity.

I come back to the reason why everyone seems to think this one is different...the degree to which we and other markets globally experienced a single day loss on Wednesday (or their Tuesday) was greater than anything most markets have seen so far during their respective bull runs.

Personally, I'm waiting for confirmation either way.  This is _trend following_ (or at least it is to me).  In order to participate in 70% of the move you've got to be prepared to give 10-15% at either end.


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## insider (2 March 2007)

theasxgorilla said:
			
		

> Some food for thought...
> 
> I count 4 significant corrections during this bull run so far.  They have involved losses in value on the XAO/XJO indexes of between 4% and 10% and have lasted between 3 and 6 weeks, depending on their magnitude and velocity.
> 
> ...




YEAH i'M THINKING iF i LOSE ANOTHER 10 PERCENT IT MAY BE A SURE SIGN... THANX DUDE


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## surfingman (2 March 2007)

insider said:
			
		

> Hey guys... how often do corrections occur? When was the last correction period? How long it last? I'm confused whether to sell or hold...




Hi Insider,

I am new to this but been looking at this as part of my trading plan, the downward trends and corrections both circled, there are 5 stronger areas and a large amount of smaller corrections over the year which arent circled, the current correction is hard to predict by anyones knowledge at this stage from what ive researched, the US economy is a very strong weight towards what will happen so keep a close eye as usual on their markets. This is my approach might be wrong if so please correct me...


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## surfingman (2 March 2007)

asxgorilla you are talking about the bull run since october?


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## CanOz (2 March 2007)

insider said:
			
		

> Hey guys... how often do corrections occur? When was the last correction period? How long it last? I'm confused whether to sell or hold...




This calls for a chart....DYO analysis.


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## theasxgorilla (2 March 2007)

surfingman said:
			
		

> asxgorilla you are talking about the bull run since october?




Since March '03.

I have corrections in Oct/Nov 03, March/May 05, Sept/Oct 05 and May/Jun 06.


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## surfingman (2 March 2007)

theasxgorilla said:
			
		

> Since March '03.
> 
> I have corrections in Oct/Nov 03, March/May 05, Sept/Oct 05 and May/Jun 06.




Okay thanks, that puts things into a better perspective spreading out over a 5 year period on the charts.


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## barnz2k (2 March 2007)

CanOz said:
			
		

> We were speaking of a correction that started in China and went around the globe....
> 
> Cheers,




Thanks canuck!

I hope I didnt jump the gun on buying stock yesterday then after that 5-6% drop. Even if it continues down slower that should be the biggest drop for now?

But as this correction was kind of started by nothing
SMH - Not so great fall of china 

Wouldnt this be different to previous corrections?


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## CanOz (2 March 2007)

barnz2k said:
			
		

> Thanks canuck!
> 
> I hope I didnt jump the gun on buying stock yesterday then after that 5-6% drop. Even if it continues down slower that should be the biggest drop for now?
> 
> ...




Personally i think this will be different in that it may be a significant move down. If you go over to the XAO thread you'll see some charts there. I agree that we should see a decline to 5400 (we were at 6000 a week ago) over the next few weeks. I have not seen any valid technical argument to the contrary. As a matter of fact i have not even heard a decent fundemental reason why this may not occur. 

The most experienced traders and investors on this site seem to agree that a decline is on the cards.

I am in CASH and have been so since Tuesday afternoon at 15:45 or there abouts. I've been trading part time for about 9 months and i will stand aside and learn as much as possible while the market corrects.

Best of luck,


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## hitmanlam (2 March 2007)

CanOz said:
			
		

> Personally i think this will be different in that it may be a significant move down. If you go over to the XAO thread you'll see some charts there. I agree that we should see a decline to 5400 (we were at 6000 a week ago) over the next few weeks. I have not seen any valid technical argument to the contrary. As a matter of fact i have not even heard a decent fundemental reason why this may not occur.
> 
> The most experienced traders and investors on this site seem to agree that a decline is on the cards.
> 
> ...





Hey canaus

I totally agree with you.  I'm not totally cashed up but I have sold more than half of my holdings.  Taken abit of profit.  So right now, 75% is in cash and reducing my risk.  The next 2 weeks will be very volatile.   The way i see it is I can miss out on a little profit.  However, if a full correction occurs, I will be much worst off.  So for me, the risk outweights the gains.  And trust me, I am not a risk averse person at all!  The last several months, I have only been in two types of stocks, U's & nickel.

If the market doesn't correct, I won't regret it.  I'm young and I've got another 40-50 years of trading shares to go!!!  There will always be another day to make a profit.


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## insider (2 March 2007)

Do you guys think that maybe the reason why the correction was  sharp when it started was also to do with a weakening US dollar as well as stop losses being triggered?


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## theasxgorilla (3 March 2007)

insider said:
			
		

> Do you guys think that maybe the reason why the correction was  sharp when it started was also to do with a weakening US dollar as well as stop losses being triggered?




I can't comment beyond the XAO and the S&P500, I think any market participant with a chart or a calculator could see how unsustainable the gains of the last half a year have been.  And almost all negative news has been ignored while share prices have marched on, particularly in the US..._they_ say this is characteristic of a bull market.

But as a professional (not me, them!), who is going to explain to the boss that they stood aside while the competition carried on and made money for their customers?  I think everyone was keeping a very close eye on each other for signs that anybody was running for the exits.  Shanghai was an excuse for a blowoff in several markets that were on an unsustainable upward trajectory.

The bears think that the market is falling so hard, and will now go on and continue to fall further so as to catch-up with all the previously ignored negative news.  If the US housing market suffers (which it is reported to be) then China suffers and India suffers and world commodity markets then suffer, which means Australia suffers, which means we should all go and find another hobby, or learn about those things called 'put options' and 'the short side' or something.


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## champ2003 (3 March 2007)

hitmanlam said:
			
		

> Hey canaus
> 
> I totally agree with you.  I'm not totally cashed up but I have sold more than half of my holdings.  Taken abit of profit.  So right now, 75% is in cash and reducing my risk.  The next 2 weeks will be very volatile.   The way i see it is I can miss out on a little profit.  However, if a full correction occurs, I will be much worst off.  So for me, the risk outweights the gains.  And trust me, I am not a risk averse person at all!  The last several months, I have only been in two types of stocks, U's & nickel.
> 
> If the market doesn't correct, I won't regret it.  I'm young and I've got another 40-50 years of trading shares to go!!!  There will always be another day to make a profit.




Hey hitmaniam,

What are you classing as a full correction? 20%?


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## hitmanlam (3 March 2007)

champ2003 said:
			
		

> Hey hitmaniam,
> 
> What are you classing as a full correction? 20%?





I dunno.  I'd be hard to pick the bottom IF it occurs.  But it seems like alot of ppl are thinking that the index might drop to around 5400 - 5600.mark?  Not a huge correction, but just a nice healthy one.  My guess would be around 5500.  And btw, it is a guess....


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## stoxclimber (3 March 2007)

hitmanlam said:
			
		

> The next 2 weeks will be very volatile.





imo volatility in global equity markets is dropping off and imo this is the end of the correction (putting myself out there).

edit: we may see a gradual slide down of the XJO but im not anticipating any sharp falls


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## stoxclimber (5 March 2007)

well, so much for  that prediction


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## Kimosabi (5 March 2007)

Luckily, every 2% fall in the market isn't as bad as the previous 2% fall...


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## >Apocalypto< (5 March 2007)

***

When do you expect the next Correction?

Right now as were reading ha    ha  :jump: 

*can't belive no one else made this call!*


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## >Apocalypto< (5 March 2007)

CanOz said:
			
		

> This calls for a chart....DYO analysis.




jeez the S&P recoved very quickly after the may sell off wonder if it could repeat it self this time around??


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## IFocus (5 March 2007)

XJO Monthly chart more room for further correction, i think lots more, price will meet up with the blue line 20ma sooner or later


Focus


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## krisbarry (30 April 2007)

I am ready for that correction, hoping for at least 10%.  Have switched to cash in the meantime

Bring on May I say


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## nizar (30 April 2007)

Stop_the_clock said:


> Bring on May I say




How very selfish of you i say


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## james99 (30 April 2007)

I wonder whether a correction might still be a few months away. Despite all the concerns re US economy, subprime mtges, inflation etc, the US companies are currently announcing very strong profits / reduced losses (ie Ford, whose loss reduced from over 1 billion to under 300 million); there is no immediate risk to geostability (I think that will be created when Prince Harry lands in Iraq and that will be a time to be very wary of the markets) and the UK is becoming increasingly alert to the value of commidities and Australian commodity companies.


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## resourceboom (30 April 2007)

I reckon we'll hit 7000 this year, with maybe one more small correction along the way!!


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