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Stock Market Correction Coming?

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Published on Sep 23, 2012

Just as mathematics helps us understand the spirals in a seashell, financial markets tend to rise and fall in parallel and symmetrical patterns, which is why something as simple as a trendline can provide valuable insight to investors. The video below examines the current patterns in global stocks (VEU) and an easy to understand risk-on/risk-off ratio (SPY/TLT). The results tell us stocks may be vulnerable to a reversal sometime in the next fourteen trading sessions, with the S&P 500 stalling between 1,487 and 1,500. You do not need to understand technical analysis to see the current patterns in play and what to look for in the coming weeks to gain bullish or bearish insight. We do not need to forecast what will happen, but only pay attention to what is happening. The video explains what we will be watching in the coming trading sessions.

The four fundamental drivers that could spark a stock market correction are:
(1) Spain may choose to delay a formal request for aid.
(2) An increasing demand for safe-haven assets.
(3) Global growth is slowing.
(4) Earnings may disappoint.
(5) The approaching 'fiscal cliff'
Just as more money is coming off the sidelines, stocks appear increasingly susceptible to a reversal. An intermediate-term peak in global stocks could come sometime in the next two weeks. Positive developments in Spain could alleviate our concerns, but for now the current track of risk assets appears to be one of a topping process.

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