Metals have been in correction mode since peaking in October.
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It maintains the mechanical aspects of Sell in May, avoiding emotional input, but incorporates a simple and well-known short-term technical indicator, MACD, to identify whether the market is still in correction mode when the entry date arrives in the fall, and whether it is still in rally mode when the calendar exit date arrives in the spring.
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And just as it did last year, this year the market made good gains in the winter months, then topped out in late April, and was in a correction in May and most of June.
In January, global stock markets declined 10% in a correction based logically on concerns about a potential government debt crisis in Greece.
But after spending much of the past year in a correction, I expect to see emerging markets have a break out year in 2013.
March 2011 featured a five-day sell-off in FCX, while a correction in April saw Freeport McMoran slide for seven consecutive sessions.
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There was little in the way of a correction in 1936, as FDR had a landslide victory, but the uptrend was broken in September 1937.
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Core inflation is spreading slower than we expected (core CPI up 0.1% in October), while the correction in housing and autos came more abruptly (Q3 GDP increased 1.6%).
The selling across many of the commodity markets has now turned into a stampede for the exits this week, as the Reuters CRB Index, as well as the commodity ETFs and ETNs are now clearly in a correction phase.
Still, UBS says the data, which is presented on a four-week average, miss a key point: Two weeks ago, based on its client data, UBS says it saw the biggest weekly net selling by hedge funds and long-only funds in this correction.
Even the largest and strongest stock market of Europe, Germany, which had been making new highs right along with the Dow, has been in a correction over the last few weeks, now down 7%, with short-term support levels broken and looking like more downside ahead.
It will be of interest to readers that Wave C was exactly equal to Wave A. Once again, this fits in with the Elliott Wave theory that says alternate waves in a correction tend to be related by a Fibonacci ratio, and 100% is a key number.
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In a correction posted on the Web site of The New England Journal of Medicine, where the study, called APPROVe, was published in February, 2005, the journal removes the conclusion that it takes 18 months for risk to emerge from the Abstract and the discussion of their paper.
In a correction, housing prices are likely to revert to the mean, economists say, potentially a big shock to home owners and investors who have grown accustomed to double-digit increases in property values and low interest rates that have allowed them to refinance and unlock more of the equity in their homes.
By contrast, investors who participated in the bull market that started in June 1962 only witnessed their first correction in May 1965, more than 1, 000 days later.
It is too soon to know whether the current sell-off in crude marks the end of the multiyear bull market in energy or represents just another violent correction in a spectacular surge that comes around once in a generation.
Smith said any further problems in the eurozone could mean a sharp downward correction in the euro that weighs on commodities.
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And many in China will see a 10% or more correction in Shanghai real estate as a positive.
However, once again bonds had already been in a big correction, this time from their highs in early 2009.
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In my view, a deep or long-felt correction in the second quarter appears unlikely.
It looks like one or more options traders selling puts in the front month and buying debit put spreads in the October contract see little danger of a sharp correction in the stock through the end of this week.
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To translate these ramblings, Bernanke and Dudley both feel that federal bureaucrats with no skin in the game can somehow identify markets heading for a correction in ways that the greatest money managers in the world have consistently failed to.
The principal source of the slowdown in economic growth that began last spring has been the substantial correction in the housing market.
In the U.S. the market also topped out into a correction in April.
Knowing what to avoid in a market correction can be just as important as knowing what to buy in a rally.
However, as Ken Hersh the CEO of NGP Energy Capital suggests, the market is in the process of realigning, as there has been a twenty percent correction in rig count (with more to go), which will tighten supply figures over the next 18-24 months.
The 30-year bonds had been in a 7-month correction, and in June reversed into a 9-month rally in which they gained 17%.
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In contemplating the months ahead, I continue to predict a 15-20% correction in the U.S. equity market by the end of the summer and recommend no more than 15% exposure to equities, with no desire to buy and hold.
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Analysts like Yulong Li, research director at Balentine in Atlanta, have been saying that a 20% to 30% year-over-year correction in Chinese real estate along coastal cities like Beijing and Shanghai would not be unheard of.
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