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Market Correction Coming?

The chart above is courtesy of Helen Meisler at TheStreet.com. You see that we currently have an investor optimism reading above 95. Historically, anything above 90 has preceded a market correction. The correction can be a few weeks away; once markets start moving away from fundamentals and get either over valued or under valued, that momentum can continue for a significant period of time. Generally there is a catalyst that ignites a correction (maybe the first signs of the Fed changing its bias back to tightening based upon food price inflation numbers???) and the optimism quickly drops off 20 or 30 points (just check out the graph).

We are in the process of placing some stop limit orders under some of the companies that will likely be impacted the most by a correction. The use of stop limit orders allows us to maintain market exposure while the move continues upward, but helps to protect on the downside once a correction takes place. There have been a number of other technical indicators that are signaling that this advance is pretty long in the tooth. This graph just makes it more visually discernible.

Mark