Of the 8 corrections between 2009 and 2016, the average
correction was 12%, excluding the 2009 crash. Corrections usually include a
very steep decline referred to as a Waterfall phase. That has almost always been
preceded by a period of increasing worries before panic started. I can’t recall
a time where the Index started down in the Waterfall phase (except perhaps
2007) – but that’s what this drop looks like.
It may be the fault of computerized trading – I don’t really know.
The market is down about 8% from the top as of Tuesday’s
close. A close at the 200-dMA would put this correction pretty close to the
average drop of 12% for corrections over the past 8-years, but 3 of the
corrections were greater at 14%, 16% and 19%.
Given the amount of bullishness and the strength of the
economy, I am inclined to remain at 40% invested in stocks for now rather than
reducing holdings to 30%, my Bear Market stance. That could change…we’ll see.
