Three things got the markets going early on yesterday. For one, there was some sigh of relief that dangers of another Korean shootout were laid to rest, at least for the time being. Second, rumor had it that N. Korea was showing willingness to let the United Nations inspectors monitor its nuclear program.
Third, but not least, in regards to the European debt crisis, Chinese Vice Premier Qishan said that the nation would “back measures aimed at stabilizing European counties struggling with debt.” At least for this moment in time, global issues were not on traders’ minds.
The markets inched higher and never looked back. My plan to liquidate one of our country ETFs did not work out as the emerging markets staged a nice rebound rally after seeming to have stalled for the past few weeks. For the time being, we will hold on to this position subject to our sell stop rules.
All major indexes have climbed to some pretty lofty levels when looking at the percentages they have moved above their respective trend lines. The S&P; 500, for example, has now reached a point that is 9.8% above its 200-day moving average. Last time this happened was in late April prior to the market heading sharply south and surrendering some 15% by early July.
I am not suggesting that a repeat is imminent, but I am saying that, based on emails from and phone calls with readers, some investor complacency has definitely set in again. It is for certain that the markets will correct again, we just don’t know the timing and magnitude of it.
Simply be aware and make sure you have your exit strategy planned and in place, so you don’t panic when the next correction strikes.