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Monday, February 3, 2014

How long this correction will last?

As we had forseen in our Sun Jan 26th post, we are under a correction, today it got pretty obvius to everyone. $COMPQ broke 4000 key level, which is a psycological level of support, as well as 1750 in $SPX, also broken. Both major long term support. The most logical path for this market is that we have a lot of downside potential. BUT, we never know, because we don't have a crystal ball.

How long this correction could last? Some studies say that most corrections last at least 8 weeks. That is what the history tell us, but the market is always trying to fool us, so we need to be ready to turn on a dime. But always after volume confirmation shows up. We need to have within a week after a first attempt of run up a day with at least 20% above average volume on the big indexes.

Never try to buy the bottom, because it's almost impossible. There's always another trade, another stock to buy, so we need to be ready to get the right set up and play it at the right time, when most of the conditions are on our side.

We have to learn to welcome this corrections because new fresh set ups will show up, new leaders will lead, and that is when the big green numbers are made, after a correction. Use this time to find solid stocks that are holding up well. They are like helium ballons, waiting to fly up in the aire but because of the wind that is blowing downwards they are not allowed to fly freely and they gain potential, and when the wind start to blow up again they will rocket to the sky.

Have a great week, take a vacation if you can't avoid staying on the sidelines, but wait for the right time. Have a good one wolfies.

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