I think the correction that has been postponed for so long, is finally materialising. To date, the STI has fallen about 6.5% from its 3313 high in November 2010. I am expecting it to correct all the down to 10%, to 2980. In fact, the CLSA has predicted this month as "Bumpy" (earlier post). In my opinion, this is a correction, not the start of the bear market yet.
Barry Ritholtz, CEO of Fusion IQ and author of The Big Picture blog, explains why he is not expecting a massive sell-off and believes the bull market will resume once the correction runs its course.
He has been largely in the bullish camp since the lows of March 2009. But as of today, 53% of his firm's roughly $500 million in assets are in cash, thanks to a combination of stop-loss selling and an expectation for a correction of 5-8%, at a minimum, in coming weeks.
Notably, "This [rally] should keep going, if history holds," he says. "We're now in the third year of a Presidential term which history tells us tends to be very powerful" as the party in power tends to do things to stimulate the economy, like cutting taxes and deficit spending, i.e. more of the same.
On the converse, I think the Shanghai Index could be nearing the end of its correction. Therefore, my sticking with Zhaojin.
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