Sunday, January 24, 2010

Bears come out of hibernation ?

I'm sure many are getting concerns and questioning whether this is the end of the bull run. The Dow sufferred 5.5% loss in just this week alone. I think the market needs to correct before it can go higher. Ten months of uninterrupted upward trend is not healthy. The excuses given by the market to take some money off the table is aptly summarized by this analyst.

"This is a correction precipitated by fear about a Chinese slowdown, uncertainty at the Fed and populist rhetoric by Mr. Obama on banks," said John Praveen, chief investment strategist at Prudential International Investments Advisers

If you have heard of Sell in May and go away. You may also have heard about October is usually a month of market crash. I want to add one more thing, 50% of the time since 1950, January is the low month during a bull run. The month low normally happens around the third week of January(Yes this week or early of next week). What are the reasons for that? This poem by Christina Georgina Rossetti will give us some hints.

January cold desolate;
February all dripping wet;
March wind ranges;
April changes;
Birds sing in tune
To flowers of May,
And sunny June
Brings longest day;
In scorched July
The storm-clouds fly
Lightning torn;
August bears corn,
September fruit;
In rough October
Earth must disrobe her;
Stars fall and shoot
In keen November;
And night is long
And cold is strong
In bleak December.

According to a pyschologist researcher, people tends to get the most depressed during winter, usually on Jan 24th of every year. May be this is the state of the minds of the market participants. Having said that, this is one of the best time to buy on weakness.

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