Bull Market Update: Brace for Potential 10% Correction

Hayes Martin, a stock market strategist, has both encouraging and discouraging news for individuals with a positive outlook on the stock market.

Starting with the downside, Martin anticipates that the continuous decline in the market will ultimately lead to a decrease of 8% to 13% in the market averages. (As of August, the S&P 500 index has already gone through a drop.) On the bright side, Martin assures that this upcoming decline will not mark the end of the positive market trend or the start of a negative market trend.

I often count on Martin, the head of advisory company Market Extremes, for valuable information. I always make sure to give his emails my complete attention. It is important to mention that there is no professional agreement between his advisory service and my auditing firm when it comes to calculating the performance of his services.

Martin sent an email in the afternoon of August 1st. In contrast to his previous emails, where he showed belief in the market’s expansion, this time he noted that the market’s internal elements were deteriorating. He acknowledged that although he doesn’t foresee a major drop, we should be prepared for a more significant temporary setback. Consequently, he recommended adopting a defensive approach in such situations.

From August 1st to August 15th, there was a 3% drop in the S&P 500 SPX, whereas the Nasdaq Composite COMP experienced a decline of 4.6%.

In a later email, Martin mentioned that his research shows there is still potential for further improvement in addressing this issue, with a range of 8% to 13%. However, he observed that the market’s internal factors have only slightly worsened, in contrast to the significant decline seen in previous bull-market highs. He also predicted that once this correction comes to an end, the progress is expected to continue.

Considering Martin’s analysis, it is crucial to remember his previous statements from the past year and a half. For example, during the pessimistic market period in late May and early June 2022, he correctly foresaw a market rally, particularly in the technology industry, along with a possible growth ranging from 15% to 25%. The subsequent three months saw the Nasdaq Composite increase by 16.5%, proving the accuracy of his prediction.

Following the conclusion of the rally, the bear market made a strong resurgence. By early October 2022, the Nasdaq erased the entire 16.5% gain it had experienced during the rally. At this point, Martin predicted a significant “reflex bounce” in the market, although he did not foresee a new bull market. This bounce would cause the market averages to rise by 10%-15%, with the technology-dominated indexes potentially seeing gains of 15-20%. The market reached its lowest point on October 12. While Martin initially did not expect a new bull market in early October and became more optimistic later on, he should be recognized for accurately predicting a powerful rally.

If you trust Martin’s analysis, it would be advisable to make changes to your stock portfolios in order to adopt a more defensive approach.