Equity markets have sustained a steady upward trend over the past four months, many with only a brief pullback in early March. However, with buying pressure in decline since early February, the markets now appear set to retrace some of that advance as the April low approaches.

In the March newsletter we indicated the growing probability of a trough developing in the second half of April. Though this month traditionally produces positive results, models have suggested a mild consolidation or correction would occur.

This pullback is not expected to be severe as volatility indicators (VIX) implies a 5%-6% maximum correction.

Bottom line: Global markets are largely overextended and appear to be starting to pullback in April. This will be the first correction in this new bull leg. The low should arrive in 3-4 weeks.

Investment approach: Many investors have remained on the sidelines and/or missed much of this strong advance since December. This anticipated correction should offer an opportunity to pick up securities at better price levels and valuations.

Investors may wish to wait until a low has established later this month before adding new positions to their portfolios.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2012 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present. He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms. He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

Donald W. Dony Archive

Comments

Jake M
07 Apr 12, 10:35

% Change

Hi Donald,

I am right in line with the 4.5-6% correction based on my own model, but your chart has a 17% correction on the NYSE. Is this a typo?

-Jake M

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