I’m wildly bullish on the stock market. I’ve said it before; interest rates are far too low and the search for yield remains intact. Understand these facts, and you will realise that the stock market isn’t in a ‘bubble’.
Gold will fall and stocks will rise in 2015. Diggers and Drillers is ready for this, but are you? The final and most profitable stage of the bull market is about to be born.
But first, get ready for a mini correction in the US Stock market. The Aussie market will follow the lead of the US. And this will be one of the best buying opportunities going around — don’t miss out!
Because this will be a buying opportunity, it’s why I call it a ‘fake’ correction…
You may be wondering, what makes me so sure that this ‘fake’ correction is coming? Here are four reasons why:
Free Reports:
First, the Dow Jones (and S&P 500) hasn’t had a decent correction for over 1,000 days. The 1,000-day mark is the fifth-longest streak without a correction since 1928. The longest run on record without a 10% correct was 1,127 days between July 1984 and August 1987.
Second, September is a major time for when options expire. Also this is a time when US pension funds sell stocks and pay retirees. In fact, since 1990 the Dow has fallen 20 times or 83% of the time in September.
Third, European bank stress testing results are due for release in late September. But don’t worry. Money printing, capital raisings, and political reassurance will ‘band-aid’ over Europe’s banking issues.
And don’t forget that the US Federal Reserves money printing program should finish in October. Some people will panic and sell. This should be on the fear that the stock market is bound to fall — after all, the free money has dried up! No doubt, these people will buy back their stocks when the bull market comes flying back.
The bottom line: welcome to a time of increased market volatility. This volatility should start to build from next week. As a result of the US Fed’s money printing exit, this ‘fake’ correction should extend into the later part of October.
A lot of money has been sitting on the sidelines waiting for this to happen. Fear has kept these punters on the sidelines. And I’m not surprised. Ever since the financial meltdown of 2008/09, the mainstream media has been over the top bearish.
As a result, if you aren’t in this bull market, this ‘fake’ correction will offer you another chance to buy stocks.
Now might wonder, how much will the stock market drop? To work this out, let’s take a look at the technical picture. The chart below tracks the Dow Jones Industrial Index; each bar represents one month.
The chart above shows that the Dow Jones has been in a strong bullish uptrend since 2011. 2011 was the last time the Dow Jones corrected by more than 10% — to be precise, over a few months, it corrected by 16%.
What about this time?
The chart shows the Fibonacci sequence lines from the 2009 financial meltdown bottom to today’s market high. Clearly you can see that each Fibonacci level has acted as an important support and resistance level since 2009.
Needless to say, the Fibonacci sequence lines have reliable at spotting major support and resistance levels. They’ve even acted as support and resistance during the 2007 bull market run. Not to mention, they supported the 2011 ‘fake’ correction market low.
As a target for this ‘fake correction’, I’m looking at the blue line.
The blue line represents the 23.6% Fibonacci sequence level. This major support level exists at 15,642 points. As such, my analysis suggests that the market could see a ‘fake’ correction of around 8.6%. In fact, because the market normally overreacts, the correction could be more than 10%.
Once the market corrects, it’s going to climb to new highs in 2015/16. I’m looking at the Dow Jones hitting 21,000 points before the middle of 2015.
My message is, stay focused and don’t get distracted. This minor correction will be the true launching pad of this bull market. Because the final stage of the bull market is awaiting us, this may be the first of what could be a few ‘fake’ corrections on the way to the market top.
So for the next month or two, hang onto your hats.
Regards,
Jason Stevenson+
Resources Analyst, Diggers and Drillers
The post Dow Jones — Are You Ready for the Fake Correction That’s Coming Next Week? appeared first on Stock Market News, Finance and Investments | Money Morning Australia.
