Questions about slowing economic growth along with profit-taking pulled the markets off their lofty levels yesterday. After the euphoric run up in September, the fundamentals will now have to play catch up via earnings and other reports.
One fly in the ointment was that analysts cut back their earnings forecasts for the S&P; 500 index, which has not happened in over a year. How much of a drag that will be on stock prices remains to be seen until the hard numbers come out.
The non-manufacturing index today can very well accelerate the current trend reversal or provide a floor until the all important jobs report on Friday will make its presence felt.
While the markets have been showing weakness during the past week, a B of A analyst expects stocks to fall sharply this month with a decline of as much as 10% to 12% from these levels. Again, this is just one opinion, and forecasts like that can be as accurate as the ones issued for the weather.
Nevertheless, markets do not go straight up forever, and a correction is overdue. To what extent it will happen is everyone’s guess. Be prepared by having your stop loss points in full view and execute when necessary. The time to get your exit strategy in order is now, and not when the market heat is on.