Ready for a Pullback?

The market hit fresh highs for 2009 today, amidst a surge in commodity prices.  What does this mean?  Well some say we are ready for a correction.  It would make sense for people to pull some profits off the table after the run up we've experienced lately.

There are many factors involved in forecasting a pullback, and some anaylsts have varied opinions.  If you watch CNBC, you will most likely hear that a pullback is tomorrow from one and that it's not going to happen by another.  What I will tell you is that there is no certainty in this market.  The odds of something happening because people expect it or it is talked about don't necessarily turn into reality.

While many don't agree on the issue of having one, they do agree that 10,000 on the Dow Jones Industrial Average is a critical point.  It is seen by some as a key resistance point and others as a psychological barrier.  Either way it is a breakthrough many are looking for.

Theory 1:  We hit 10,000 and money from the sidelines pours in from investors not wanting to miss out on the rest of the run-up.  This pushes us up past 11,000 and possibly even as high as 13,000.

Theory 2:  We hit 10,000 and take a dive back to 9,000.  Why 9,000?  10% is seen as a normal "Market Correction" which most say is well overdue.

October is historically a bad month for the stock market in terms of cataclysmic events.  The market peaked on October 9th two years ago, and we've been lower ever since.  The crash of the 80's was also in October.

What to do about all of this?  Take it in stride.  At our age we are best to ride it out.  Timing the market is not an easy task and can cost you big in the longrun.  The market may get cheaper, but if it fails to you may never see prices this low again in your lifetime.  Gains from timing the market are harder to make for individual investors since most of us don't play with billions or even millions of dollars.  The cost of trading eats into your profits and the stress will shorten your lifespan.

Have a good week.

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