Farrell: The Terrifying and Ugly Truth About Corrections
If 1040 doesn't hold the next stop could well be 950.
That would represent a 1/2 correction of the advance.
While the one-third varieties are more the norm, you occasionally get socked with a one half job and it smacks your face hard and causes damage.
But it would not change a technicians view that an uptrend is still in place. I think/hope we will be in the 1/3rd category.
One of the reasons I think the damage is almost over is the valuation of the market. Consensus earnings estimates for 2011 S&P companies reached $98 recently. They have come down to $94. I have been using $90 and figured I was high. Let's say it's $85 just for fun. With the market now at around 1070, the price to earnings multiple is a modest 12.6 times. We can live with that.
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