# Has the market correction started?



## Getafix (Dec 29, 2014)

So i've been reading several articles in the past few weeks predicting that the S&P 500 will go through a market correction at some point this year, perhaps losing up to 10%. It's down 1.18% today & TSX 1.26%. I know that as a long term investor you shouldn't really worry about these corrections and given enough time everything recovers. However, having just started investing early this year, i realised that i might have bought at the peak. On the plus side, i am not fully invested and still have some cash lying around to buy if these prediction turn out to be true. I also have invested 50% in dividend paying stocks, so i'm happy to sit back and collect dividends in the meantime. 

So what do you guys think of these predictions and how will the S&P 500 drop affect the TSX?


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## james4beach (Nov 15, 2012)

This is really impossible to know, as stock market movements since 2009 are really at the whims of central banks and what they decide to do.

If the Fed/Europe decides to expand QE, stocks will likely go up. If they don't, they will stay flat or decline.

That's the problem with this artificial, monetary policy-addicted market. They (central banks) control the show, and they determine which way the stock index will go.


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## cainvest (May 1, 2013)

Getafix said:


> So what do you guys think of these predictions and how will the S&P 500 drop affect the TSX?


Who knows ... you'll always find predictions going both ways. You can always keep some cash on the sidelines waiting for a correction as long as you realize it could be tomorrow or three years from now. For investors with a long time horizon riding out the peaks and valleys is likely the best way to go.


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## james4beach (Nov 15, 2012)

You guys _do_ realize you're trying to trade against the Fed, right? Good luck beating them... they have all the info, knowledge, and control all the knobs. The central banks buy index futures, for god sakes.



> For investors with a long time horizon riding out the peaks and valleys is likely the best way to go.


Yes, if your time horizon is 20+ years.


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## gibor365 (Apr 1, 2011)

> you'll always find predictions going both ways


 True . Just on Sunday read that recently, Dwaine introduced a valuation model that is much more sophisticated than the popular Shiller CAPE method. It also provides a much less worrisome conclusion - 13.7% returns through the end of 2016.
http://recessionalert.com/sp-500-returns-forecast-4q2014/


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## AltaRed (Jun 8, 2009)

The TSX is not that correlated to the S&P500 other than if the USA gets a cold, the TSX can get pneumonia (the commodity/export effect).

Any stock market movement less than 10% over a period of time truly is noise. It is not meaningful in any way. There have been many of these over time. Use it to grab a few stocks on sale IF indeed one can find any. It takes a bonafide correction of >10% to cause some to panic and dump some good stocks for contrarians to lie in wait and grab. 

There is good reason to get a correction of circa 10% this year simply because we have not had one for too many years. The bookies probably have odds on it happening.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> This is really impossible to know, as stock market movements since 2009 are really at the whims of central banks and what they decide to do... That's the problem with this artificial, monetary policy-addicted market. They (central banks) control the show, and they determine which way the stock index will go.


Good to know that when there was less market interference it was predictable ... :biggrin:


Cheers


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## james4beach (Nov 15, 2012)

lol, that's true... it never was predictable before either but I think at least we had more free market forces moving the markets.

The difference today is that central banks have a huge amount of control over the stock & bond markets. They are intelligent players with huge powers, and that intimidates me as a retail guy involved in the market.


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## dogcom (May 23, 2009)

James4beach is right as long as the Fed and central banks are there to manipulate the markets then you probably won't see a very meaningful correction. If we just left it to free markets then the bond markets would crash and the stock market with it and we could see the DOW at 3000 or less. We are now stuck with central bank interventions and a fake market that doesn't resemble anything in the past so past results won't tell much going forward.


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## gibor365 (Apr 1, 2011)

> James4beach is right as long as the Fed and central banks are there to manipulate the markets


 and imho they will continue, especially when we have soon US elections


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## BoringInvestor (Sep 12, 2013)

The answer to the OP's question is a strong: maybe.


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## andrewf (Mar 1, 2010)

gibor said:


> True . Just on Sunday read that recently, Dwaine introduced a valuation model that is much more sophisticated than the popular Shiller CAPE method. It also provides a much less worrisome conclusion - 13.7% returns through the end of 2016.
> http://recessionalert.com/sp-500-returns-forecast-4q2014/


More sophisticated <> more accurate.

Also, CAPE/Shiller P/E makes no predictions about short run stock returns, since those are largely driven by sentiment and the business cycle. It has decent predictive power for longer term returns (10 year), and that is mostly driven by mean reversion.


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## gibor365 (Apr 1, 2011)

> More sophisticated <> more accurate.


 I don't tell it's more accurate or not  my point is that there are always different predictions


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## uptoolate (Oct 9, 2011)

Making predictions is very difficult... especially regarding the future.


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## Getafix (Dec 29, 2014)

Thought i would give this a bump. Since i started this thread S&P500 is down 1.33%, TSX is down 3.98%!


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## mrPPincer (Nov 21, 2011)

Would be nice, but we're pretty far from anything resembling a correction atm, just put 1K into CDN index today, but just sold 3K US index last monday at an all-time high, just rebalancing.

A real correction (10% plus) would be quite welcome for me right now as a buying opportunity, but nobody knows when it will come, it could be two years from now or more, it could be tomorrow.


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## Davis (Nov 11, 2014)

BoringInvestor said:


> The answer to the OP's question is a strong: maybe.


I don't think you've provided a convincing argument for making such a bold statement. I think you should qualify that conclusion a bit. ;-)


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## AltaRed (Jun 8, 2009)

mrPPincer said:


> A real correction (10% plus) would be quite welcome for me right now as a buying opportunity, but nobody knows when it will come, it could be two years from now or more, it could be tomorrow.


Agreed. And it is only known in hindsight... so no market is correcting until it has definitively corrected.....


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## Pluto (Sep 12, 2013)

For some sober thoughts on that,

http://www.marketwatch.com/story/irrational-exuberance-is-dooming-the-stock-market-2015-05-27

Apart from the above article, think about the way you are phrasing your question. Your question assumes there is a method to answer it with certainty. But the assumption is incorrect. I think it is more useful to think about the issue in terms of probabilities - the same way most weather predictions are made these days. I.E. in terms of the chances of rain, snow or whatever. When they predict in terms of probability they are acknowledging the reality that circumstances can change rapidly. 

So one thing to keep an eye on that will increase the odds of a correction right now is job growth. Look at the higher than expected job growth in the US recently. Then all of a sudden, people start talking rate increases. Then people start talking correction. Interest rates are a factor in Value of assets. Rates go up, the value of assets goes down accordingly.


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## lonewolf (Jun 12, 2012)

Now is the time to panic before everyone else does.

E motion is energy in motion so do not try to tell me that emotion has to be removed from playing the market to make money. Remove energy in motion good luck with that if you still want a pulse.


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## cainvest (May 1, 2013)

lonewolf said:


> Now is the time to panic before everyone else does.


But wait .... its going back up again.

I think on the back of every investment product (fact sheet, prospectus, etc) and always visible on each trading platform screen should be the words ...

DON'T PANIC

Just like on the back of the HHGTTG.


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## Getafix (Dec 29, 2014)

Time for the monthly update, TSX down 7.69% (ouch!) since my original post, S&P 500 has held up a little better down 1.65%


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## Moneytoo (Mar 26, 2014)

Bought a few canadian stocks in June -July, still waiting for S&P 500 to come down (sold some VFV last week near top, plan to replace it with VTI - hopefully near bottom... Purchased USD in advance in April and sold some losers - well prepared for that damn correction everybody's warning about, but afraid I'll get tired of waiting before it happens - like last year )


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## Getafix (Dec 29, 2014)

Haha, you know what i didn't really believe it when i made the original post but that was all before Greece, China, Iran & Oil happened. So now you never know, another major event like that could probably trigger a correction.


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## Moneytoo (Mar 26, 2014)

Well if it doesn't happen and the markets go up instead - I have a few things that I want to sell... :biggrin:


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## CPA Candidate (Dec 15, 2013)

Getafix said:


> Haha, you know what i didn't really believe it when i made the original post but that was all before Greece, China, Iran & Oil happened. So now you never know, another major event like that could probably trigger a correction.


The amusing part is, all the mentioned factors are mostly irrelevant. Greece is a global nothing, hardly anyone in China owns stocks (3%) and Iran isn't going to make much of a difference in the global oil market in the near future. Frankly, a nuclear deal seems like good news regardless of the oil price effect.


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## Moneytoo (Mar 26, 2014)

CPA Candidate said:


> The amusing part is, all the mentioned factors are mostly irrelevant.


please don't tell anybody! i'm still waiting for VTI to dip some more - but it's like watching plants grow... sigh

View attachment 4938


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## blin10 (Jun 27, 2011)

man, tsx is getting killed... wow


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## gibor365 (Apr 1, 2011)

blin10 said:


> man, tsx is getting killed... wow


together with petro-CAD$ 76.66


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## besmartrich (Jan 11, 2015)

There is nothing worse than stagnating market. I would love for a good and quick correction soon so that I can buy good companies at good price by using some leverage before my net worth grows higher.


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## Canadian (Sep 19, 2013)

I keep adding to my positions as they go down to reduce my ACB - a little bit of risk management. I don't know where the bottom will be but averaging down and trimming back when my additions make a bit of money works for me.


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## lonewolf (Jun 12, 2012)

A close by both the DJI & DJT below the July low would mean the top was in, the 2009 lows would then be violated.


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## Financialplannerdude (Apr 30, 2015)

cainvest said:


> Who knows ... you'll always find predictions going both ways. You can always keep some cash on the sidelines waiting for a correction as long as you realize it could be tomorrow or three years from now. For investors with a long time horizon riding out the peaks and valleys is likely the best way to go.


Exactly, I tried that once liquidated my complete portfolio in expectations of a correction which did come, the banks BCE all dipped and quickly came back. Got busy and missed it completely, not that I would have bought, I mean who wants to catch a falling knife. Lesson learned don't time markets


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## Getafix (Dec 29, 2014)

So it's time for the monthly update: TSX down 10.61% since the thread started, S&P 3.72%. If this keeps up i guess it'll be safe to answer my own question with a YES!


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## gibor365 (Apr 1, 2011)

Getafix said:


> So it's time for the monthly update: TSX down 10.61% since the thread started, S&P 3.72%. If this keeps up i guess it'll be safe to answer my own question with a YES!


I'm up just about 1.5% YTD, one more day like today and it goes negative.... good thing that dividend income is still increasing as majority of stocks who cut/suspended dividends are very small % in my total portfolio....
So fat this year PCF/PT/Tangerine gave me better return that equities .... first time sinse 4 years ago when I started investing....


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## besmartrich (Jan 11, 2015)

Getafix said:


> So it's time for the monthly update: TSX down 10.61% since the thread started, S&P 3.72%. If this keeps up i guess it'll be safe to answer my own question with a YES!


The same here!


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## Rusty O'Toole (Feb 1, 2012)

SPX down 125 points in 4 days, could this be it? End of the bull market dating back to 2009?


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## doctrine (Sep 30, 2011)

It may seem like chaos, but the S&P 500 has to drop another 50 points to enter correction territory at 1921 pts. It has to hit 1707 pts to enter bear market territory. Quite a way to go. If it's the case, it's a long way to go still.


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## Belguy (May 24, 2010)

The Dow was down how much today? Time to cancel my vacation and stop buying!


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## Moneytoo (Mar 26, 2014)

Last August the correction was so sharp that by the time I decided what to buy and at what price - it was over... So we were better prepared in October, with staggered limit orders entered in advance. 

We bought a few falling knives (aka long term buys off their highs ) so far, emotionally it's much easier this year: I feel glad when the order gets executed - and upset when it doesn't, hoping that whatever I'm trying to buy drops some more the next day...

I see red, but I don't look at how much our portfolio has fallen. The only thing I'm trying to decide - deploy all the remaining cash next week or leave some for October


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## GoldStone (Mar 6, 2011)




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## londoncalling (Sep 17, 2011)

Moneytoo said:


> Last August the correction was so sharp that by the time I decided what to buy and at what price - it was over... So we were better prepared in October, with staggered limit orders entered in advance.
> 
> We bought a few falling knives (aka long term buys off their highs ) so far, emotionally it's much easier this year: I feel glad when the order gets executed - and upset when it doesn't, hoping that whatever I'm trying to buy drops some more the next day...
> 
> I see red, but I don't look at how much our portfolio has fallen. The only thing I'm trying to decide - deploy all the remaining cash next week or leave some for October


I am in the same spot. Short term I am sure I will make the wrong choice. Long term it will make little difference. Held off purchasing today. will fight the urge again on Monday. Cheers


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## Moneytoo (Mar 26, 2014)

londoncalling said:


> Held off purchasing today. will fight the urge again on Monday. Cheers


Yeah my husband wants to wait for the bottom and buy on the upside. Last year it didn't work - as it's easier to buy something a dollar cheaper on the way down than pay a dollar more on the way up... so he just missed it completely and then it was too late. So we'll see if it works this time - another exciting learning opportunity


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## lonewolf (Jun 12, 2012)

I m looking for a wave 2 correction to the up side to buy some more puts


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## OptsyEagle (Nov 29, 2009)

All I can say is we finally have found a moment, in a long time, where it is a little difficult to find someone that is downright bullish. It's nice to see for a change. Maybe stocks will go up...._oh darn, I ruined it!_


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