The major equity markets across the globe have had a respectable pull-back over the past several days. Is this a natural and healthy correction within the major upward trend or the beginning of a more serious downward secular bear? Of course if we had the answer to that we’d be the one with the crystal ball.
The TSX (Toronto) stock exchange has had an 800 point retracement from its high of 12,070 on January 11, 2010. Today the index fell to 11,271 (as I write). That’s a 6.7% decline.
The market technicals suggest that there is good support around these levels (buyers believe this level represents good value) but if we break below the December low of 11,248 we could be in for a more serious pull back to the 10,800 level.
Some of the sharpest technical traders suggest that we’ll see a decent bounce upward from around this level, but could break down to lower levels shortly thereafter.
Most fundamentalists believe the global economy is getting stronger, not weaker – which bodes well for equity strength.
Some conspiracist say that “Wall Street” is trying to send a message to President Obama that his suggested levy on big bank (an effective sur-tax) and senior big-pay executives, a message to “back off”.
President Obama is having a state of the Union address tonight, which will very likely affect markets tomorrow. This speech could be the precipitous to the next leg down, or an adrenaline shot to get the markets moving up again. We’ll just have to wait and see.
Saverio Manzo
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