Corretion is Inevitable.....

In the past I have warned readers (of this blog) quite number of times as to the overbought nature of the market. This time around I am posting more on the same topic.

The current low interest rate environment and recent bonds rally (low yield) has driven the riskier assets higher. Since late August, investors witnessed an extraordinary environment. S&P 500 clearly has proven to be exponentially more dramatic and eventful. This euphoria might continue for a while due to Fed's QE II announcement. 

Equity markets have turned positive and more importantly the sentiments appear to be very upbeat. All over the world equity markets shook off negative sentiments such as economic slowdown, sovereign debt issues, etc. Investors have also dismissed the fear of double dip recession and jumped back to buy stocks. based on notion that "Fed will come to rescue."

This surge has caught many investors by surprise. Fundamentally things have been improving, but at a slow pace. Technically things are indicating red lights, i.e. signs of market been overbought and really over bought.

I have analyzed the index movements (S&P 500) over past 12 months (refer below the chart) and have divided the graph in three sections and 5 parts.

• Section 1 "the green zone" {part 1 & 4} is where you can see the market performing flat. 
• Section 2 "the blue zone" {part 2 & 5} is where you can see that the market had escalated and the last but not the least
• Section 3 "the red zone" {part 3 (and 6?? - coming soon)} is where the market been corrected.

 All the patters indicate that we will witness another correction!!

You can also refer to my earlier post dated 2nd November "Is it Time for a Correction?"

Hope you take/make wise decision(s).
Happy Investing!!!

 Data: Bloomberg; Wealthy Opinions