Last Sunday, based strictly on my reading of the general market action, I posted my observation that the indices, after the huge run up from the October 2023 lows, have started to correct:
“In my 30+ years of experience, I’ve noticed that when correcting after a big up move, markets tend to first consolidate those gains by giving back approximately 35% and sometimes as much as 50% of the appreciation, before starting its next leg up.”
And the following day, Monday, before the markets opened for trading, I posted the following:
“I believe this morning’s pre-market bullish indications are a head fake and in my humble opinion, the markets will turn around and head south”
And as per the plan posted here, I sold all my long calls, and other than buying 10 contracts of QQQ puts (betting that QQQ, the ETF that tracks the Nasdaq 100 index will go down) I basically moved into cash. And thankfully so!
Barely 60 minutes into last Monday’s open, as if on cue, the indices turned around and began their pull-back. And the selling, other than in the DOW, has been relentless.
In my last Sunday’s post, I predicted that the DOW will suffer the smallest percentage pull-back and the S&P and the Nasdaq will correct the most and posted my estimated size(s) of the pull-backs for each index. Those numbers and the actual intraday correction(s) numbers, as of this past Friday are:
DOW: 648 points (estimate); Actual: 371; Percentage Correction: 0.98%
S&P: 249 points (estimate); Actual: 169; Percentage Correction: 3.30%
Nasdaq: 951 points (estimate); Actual: 952; Percentage Correction: 5.89%
On Friday, after the markets closed, my favorite newspaper, Investor’s Business Daily, said the following:
“The S&P 500 falling below the psychologically important 5,000 level and the Nasdaq composite losing further ground on its 50-day moving average, the current outlook is being downgraded to “market in correction.” The recommended exposure level has also been cut to 0% to 20%.”
I get to crow that I made the market correction call before the start of the actual correction and a week before IBD! 😀
Best~
karim
DISCLAIMER: I am not a licensed broker or securities dealer. All postings made here are strictly for my personal record keeping and in no way, shape or form, am I even remotely suggesting others to follow my Buy and Sell moves. Trading options is not for the faint of heart as one’s portfolio can move up, or down 10%-50% or more during a single trading day, so trade with extreme caution. Past performance is no guarantee of future results.
Full Disclosure: I own options in the stocks of companies mentioned in my posts.