The talking heads in the mainstream media are out and talking doom and gloom. The correction is now starting to worry the public and memories from the 2008 crash are clearly still on people’s minds. From the start of this correction the S&P has fallen about 8% take a look!
My initial prediction was that this correction would go all the way to 1320. However, when a correction starts approaching a 10% pullback that’s when I begin to purchase stocks with reserved capital I have saved in my brokerage account. Please let me be clear… I AM NOT backing up the truck and going all in. I am making systematic purchases of high quality businesses in small lots.
For example, assume I have $10,000 in saved capital ready to deploy in a “market panic/meltdown”…
When the market reaches a 10% correction I take 1/3 of my capital and allocate it to Dividend Kings I have been wanting to purchase.
If the market falls even further (that’s completely fine) and reaches a 20% correction I allocate another 1/3 of my capital to Dividend Kings.
In the case of an absolute market crash and there is a 30% correction I allocate the last 1/3 of my capital to Dividend Kings.
***And yes, I still continue to make my bi-monthly purchases of Dividend Kings that are the cheapest in relation to their true value***
With all that being said let’s take a look at where I think the market is headed!
The technical indicators for the S&P 500 are still trending lower and are showing no bullish signs. With the RSI in oversold territory we can expect a relief bounce up to about 1380. With the Fiscal Cliff concerns there aren’t a ton of people lining up to pour money into stocks. If the outcome is negative and the S&P 500 closes below 1340 then we’re in for some trouble.
Here’s to our Wealth!
***SIDE NOTE: Sorry for the prolonged absence. We recently closed on our house that we had built and are still moving in and getting things unpacked. I will be back stronger than every next week!***