Yesterday was a day of pondering in the markets, as concerns mounted about the possibility that the global recovery might be slowing down.

Inflation concerns in China and Great Britain occupied front page news followed by disappointing domestic retail sales in January.

Energy shares were a drag on the market, after Monday’s strong jump, following the theme that potentially slower sales growth will translate into less demand for energy products.

The beneficiary of the inflation fear story was gold, which headed higher for a second day in a row. Even though gold has been flat since the beginning of the year, it still should be an important component in an investor’s portfolio. Not only will inflation concerns in other parts of the world support its trend, so will sudden unexpected global uncertainties, which are sure to surface again.

While inflation is not a threat in the U.S. at this point, it sure is in other countries, such as China and Britain, among others. China reported a 4.9% inflation rate last month, which is about a 2-year high. Great Britain comes in at a close second with 4% followed by Spain with 3%.

Food prices have been rising around the world, which is represented by the fact that the commodity index (DBC) has risen sharply. While prices have not always been passed on to the end user yet, this development is worrisome in the sense that those with current high inflation rates will have to step on the economic brakes, so to speak.

Depending on the severity of the actions taken, that will not bode well for future global expansion and will eventually affect stock markets worldwide.

Disclosure: Holdings in DBC

Despite elevated market levels, and fears of a correction, the dip buying mentality is alive and well as Reuters reports in “Buy That Dip, Baby:”

The new national pastimes are calling the top of the stock market, commenting on Middle Eastern affairs and — buying dips.

Lee is expecting a pullback in the March and April time frame, with the S&P; 500 rising to 1,333 before falling to around 1,250, taking the market back to where it was in late December.

“You really need to start buying at the 1,270 level,” he said. “You need to be selective and getting ready to buy that dip.”

[Emphasis added]

There you have it. 1,250 is the first number I have heard of where the eventual correction might end up, which is about a 6% pullback from current levels.

While buying dips in a bull market can have its obvious rewards, it only works….until it doesn’t. And that is the moment when a pullback turns into an actual trend reversal and market direction changes from bullish to bearish.

I for one will most certainly not rely on forecasts, like the above, by blindly using the 1,270 as a buy point. Make sure that the actual uptrend remains intact before deploying more monies in the market. That may cause you to enter at a slightly higher level, but you will have reduced downside risk considerably.

It had to happen eventually. A major player would offer an all ETF 401k plan. While only very few custodians have ventured into that arena, Charles Schwab & Co. has announced that they are up to the task as well, as ETF Trends recently reported:

This news should cheer investors who want to see a wider array of all-exchange traded fund (ETF) 401(k) plans on the market: discount brokerage and ETF provider Charles Schwab is getting in on the action.

To me, it is not the old battle as to whether ETFs are a better investment than mutual funds. What it comes down is lower cost and less trading restrictions. Especially the latter has been a thorn in my eye for a long time.

I manage a few 401ks for clients, and the hoops I have to jump through to be sure I don’t rub the custodian the wrong way by making one too many portfolio adjustments are simply ridiculous and out of touch with reality.

I welcome this development and hope that other custodians will follow suit. After all, you as the plan participant are the one who stands to gain the most; and that’s what matters.

I don’t quote Barron’s very often, but they featured a nice piece on risk titled “That’s Better Now.” Let’s look at some highlights:

Investment success last year meant embracing risk. Certainly, it wasn’t hard to find.

[Emphasis added]

There is much more to this article so check out the link if this interests you. I think the last paragraph above sums it up nicely. Risk has clearly increased with the major indexes hovering at these multi-year high levels.

I have repeatedly said that no portfolio growth has really been accomplished since June 2008, because the past 2-1/2 years have been spent making up losses—nothing else.

Of course, we could march even higher from here although the markets are priced to perfection as are expectations of future economic developments. Add to that the usual menu of potential global uncertainties, and I have to question whether this rally will end well.

For a better and well researched historical perspective, Mish at Global Trends wrote a fine article on the subject, which you can read here. It’s a bit lengthy but well worth your time.

My latest No Load Fund/ETF Tracker has been posted at:

http://www.successful-investment.com/newsletter-archive.php

Continued upside momentum pushed the major indexes to another winning week.

Our Trend Tracking Index (TTI) for domestic funds/ETFs has moved above its trend line (red) by +5.47% (last week +4.85%) and remains in bullish mode.

The international index has broken above its long-term trend line by +9.08% (last week +9.25%). A new Buy signal was triggered effective 9/7/10. If you decided to participate, be sure to use my recommended sell stop discipline.

For more details, and the latest market commentary, as well as the updated No Load Fund/ETF Tracker StatSheet, please see the above link.

No post today, since I finally had my long overdue cataract surgery done. It turned out to be successful, but my vision is still a little blurry, which makes reading and writing a bit of a challenge.

I should be back to normal within a day and plan on sending out Friday’s weekly newsletter as usual.