Welcome To “The Correction”

What an ugly day for the markets.  The Mideast is at a rolling boil and Dr. Bernanke thinks it’s a great time to insinuate that QE2 could be finished.  Nice touch.

Going out on the low print of the day today sets a very bearish tone in the near term.

I’ve done my best to write about the risks as I identified them, but the reality is, calling a market top is next to impossible.  For the near term it appears that we’re in for a decent correction.  The previous support of 1300 in the SPX will more than likely give way in the next few days and global equities should trade lower as the global risk assets of oil, gold, silver trade higher.

The stock market looks for leadership and rides the leaders until the wheels fall off.  Then it rotates out of the old names and into new leadership until the wheels fall off again.  We’re still in a bull market, and once we get rid of the dead wood the market will pick a reason to rally, and poof, we’ll have the next “thesis.”

Value typically holds up better than growth good during corrective periods.  I’ve been talking about the growth to value rotation since Christmas.  Once we finish the difficult work of correcting, growth stocks will be where you want to be.  Make no mistake.  This is the time to figure out which margin call you would like to purchase.

As always, the game is about probabilities.  I feel the high probability bet is lower before we make new highs.

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