I will never tire of repeating it, When the market defines a strength and an upward trend as clear as that shown by the major world stock exchanges in recent years, we must consider corrections as an opportunity.especially if the decline is more than 10% from the last high. These corrections are ideal times to enter the market if you haven’t already, or to increase your positions if you are already in the market.
These corrections help identify the different ascending lows (steps on a chart) that characterize any uptrend. I want you to remember this the next time we experience a correction like the one European stock markets have experienced since mid-May, when the EuroStoxx 50 failed to break above the highs of early April. 5,122 points. It was a warning sign that something was wrong and that we might be facing a consolidation or correction process, which finally reached the low of August 5 at 4,474 points..
On Wall Street, the correction began later, in mid-July, and was rapid and intense, as predicted months ago, according to the rule of alternation. If last year the Nasdaq 100 took three months to correct 12% from its peak of July 17, 2023, this time it took a month to correct 15% from its peak of July 10. The rule of alternation at its best, which is why I was not surprised or hesitate to recommend buying when the indices fell 10% from their previous high.
Not everything I tell you is relevant right now, but I want you to keep it in mind for the next bearish correction with similar characteristics. The next one will probably not be as fast and intense, but will take more time, and at that time, I will be here to remind you.
Currently, if the stock markets fall again, it would not be surprising given the verticality of the rises since the lows of August 5, which have recovered between 80% and 100% of the last decline. It would simply be a consolidation of this rise. I don’t expect a deep decline or for the market to offer us as clear a buying opportunity as the one in early August.that I waited for months for my two twin children to start trading on the stock market.
If a consolidation occurs, I doubt the decline will retrace more than 50% of the bounce. In fact, From a Fibonacci adjustment of 38.20%, I would recommend increasing stock exposure. and I would look for entries into stocks that have done the best, showing strength, which is always the thing to buy. If the rises continue with this verticality, taking the overbought to extreme levels, it would be more prudent to take profits than to continue buying.. I am talking about reaping partial profits, but in no case will I significantly reduce exposure again by playing the accordion. This is not the time to get out of the stock market.
