Congratulations to all those that participated in the recent stock market run! I hope you made a ton of money. But the bad news is that what goes up must come down eventually. Unfortunately, that time is here now. We’ve have seen an incredible stock market rally this year so far. The rally started in late December of last year when S&P500 completed the “cup” and then completed the “handle” patterns. The “cup and handle” pattern is one of the strongest signal indicators for a bullish trend. S&P500, along with all the other major indices skyrocketed from this point and most likely, ended today. The 2-month rally was nice but it was unsustainable.
I wish I was one of the lucky ones trading in this rally, but I was uncertain, even after the highly sought after cup and handle formation was completed. I remember the last time I mentioned this formation, it did not go so well so I decided to stay out of the market. Hindsight is 20/20, right? S&P500 is up 16% during this rally and 7.5% this year so far. So, what now? What’s the next step?
I think the market will go higher, but not before correcting itself. The 50 moving day average is at $1288 and that’s the target I’m expecting to hit before going back up. I suggest you take on one of these two strategies:
- Do nothing. Don’t buy and don’t sell. Just hold on to whatever shares of whatever company you have. Ride out the downward correction for a few weeks and wait. Look out for the 50 moving day average at $1288 and wait for your next move. You can buy more at that time or just keep what you have and watch it go back up.
- Sell now and buy back at cheaper prices. The market will most likely go down that started today. Keep and eye out for the 50 day moving average and buy back cheaper at that point. If you like, you can buy back little at a time as the price goes down. That way, you’ll be averaging down your total cost and won’t have to worry too much about missing out on the bottom.
I know I have strongly suggested protecting your 401k and staying out of the market with the economy sucking so bad prior to this rally. My plan is to come back in slowly when the S&P500 draws closer to the 50 day moving average.
How do you feel about the market these days? Are you concerned about Greece defaulting? What’s your plan?
photo: Wall Street Sign NYC, JSquish via Wikimedia Commons
Disclaimer: I am not a professional trader. Please take any suggestions and advice with a grain of salt and perform your own due diligence prior to making any financial decisions.
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{ 8 comments… read them below or add one }
Hard to say what will be happening. I was hoping the rally would last until May, then sell to sit out the summer, but I am concerned like you. I think that I will look to purchase some put options on any rally days.
cashflowmantra recently posted..Should You Incorporate Your Side Income Stream?
Yeah, I’m still confident that the market will correct itself, but still surprised that the market is rallying again today.
Charles recently posted..Stock Market Rally Ended – Now What?
Market is up strong at least right now. I’m not doing any trading, but I am still in the market, my holdings are up nicely over the last couple of years.
Dr Dean recently posted..Giving Credit Card Info To Social Media? Come on!
Market timing is seldom successful but I am hoping the rally lasts till end of march, there’s plenty of time to hear about Italy and Spain for the rest of the year! (That is if Greece does get bailed out)
BeatingTheIndex recently posted..Xtreme Coil Drilling: Undervalued Drilling Company on the Cusp of Strong Growth
Personally, I am glad the rally has come to an end. I Day-trade for a living and can profit from both bull or bear markets, but the gigantic rally so far in 2012 needs to pullback in order for the market to remain healthy.
someday I’ll do the research, but for now, my money stays in my 403(b) in a targeted retirement fund.
shanendoah@The Dog Ate My Wallet recently posted..The Phone Saga Continues
This is the reason I am not entering now. I don’t understand charts, but I do feel that there’s a scope for short term correction. Waiting for summe slow down before entering
SB @ One Cent At A Time recently posted..Chase Freedom Credit Card Review
I am going to wait until it dies down before jumping in with this year’s investments. It is my moderate approach to “timing” the market. I too think it will die off soon, but it’s hard to guess.
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