When is the Next Correction?

The S&P has closed higher for 9 of the last 10 sessions. That includes a fresh all time high of 2,365 on Tuesday.

The question is not about why stocks are going up. Rather, it is how far they can advance before the next serious correction? Or at least, the next meaningful pullback.

My personal guess is that 2400 will be a spot of stiffer resistance for stocks. That represents a sizeable 15% gain since just before the election. And represents a belief that GDP will rev up on a cocktail of lower taxes and higher infrastructure spending.

Anything that delays or derails those pro-growth initiatives from becoming a reality will lead to a "sell first, ask questions later" reaction. As such, I am looking to trim some profits as we approach 2,400. Probably ratchet down from 100% long to 70-80%. Then look for spots to redeploy cash on any dips.

That advice is more for the active traders in our community. Long term investors should just stay long the stock market until there is some meaningful reason to believe that the bear is awakening from his long hibernation. Right now that bear is sawing logs with a loud snore.

Best,

Steve Reitmeister

Executive Vice President, Zacks Investment Research

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