Tuesday, 11 May 2004

Stock markets suffer big correction

Stocks got thrashed on most markets yesterday, especially on Asian markets.

S&P 500

1,087.12

-11.58

-1.05%

Nikkei 225

10,884.70

-554.12

-4.84%

FTSE 100

4,395.20

-103.2

-2.29%

Hang Seng

11,485.50

-425.26

-3.57%

Korea Composite

790.68

-48.06

-5.73%

Straits Times

1,791.78

-51.94

-2.82%


Barry Ritholtz at The Big Picture thinks that the market has priced in rising interest rates and oil prices (see Market Adapting to Ugly Realities). Well, doesn't look like it to me.

It looks like stocks are headed for a major correction in the new few weeks or months. For most markets, this is the first major correction since the current rally began last year. As I mentioned in an earlier post -- Economy peaking -- or is it? -- it's unusual to have a market complete a rally with just one huge impulse wave without any intermediate correction. So I think the current correction constitutes an intermediate corrective wave and will be followed by a resumption of the rally later in the year.

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