Market Consolidation
March 15, 2011 at 1:18 am Leave a comment
It appears that the market consolidation that I have alluded to previously has finally arrived. A number of world events in recent weeks has contributed to it:
- Unrest in the Middle East, particularly in Libya, and resulting rise in oil prices
- Earthquake and tsunami in Japan
- Unexpected Chinese trade deficit in February
- Downgrade of Greek and Spanish debt, and resulting resurfacing of PIIGS default fears
Despite these headwinds, the markets held up remarkably well, and are only down around 4% from the recent tops. Given these events, and the fact that a pullback was overdue in any case, I am quite surprised that the downturn was not more severe.
The economic fundamentals, however, remain positive. Corrections like this one are normal and healthy for the market. The current pullback may well continue, but I believe it will be short-lived. In April, the first quarter reports will start coming in, and should provide support for equity prices.
Entry filed under: Market Conditions.
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