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As any weatherman will tell you forecasting is a difficult task. In Canada we are very serious
about our weather because of the economic impacts and as a result the largest supercomputer in the
country is dedicated to trying to provide us with an accurate outline. That being said we all know
that the weatherman, or weather woman is only providing the best estimate possible. We all know
that they don’t tell us it will rain at 4 pm and stop at 6:35. What they do is provide us with an
expectation of what weather we can expect using history, wind patterns, and other data that has
proven reliable. In this way we go out carrying an umbrella or snow shovel, and in both cases hoping
we don’t have to use them, but are prepared to if we must.
 Equity market forecasting is a lot like that. No one can say definitely that tomorrow will
be an up or a down day but by using economic data, past history, and experience
we can provide a reasonable estimate. We can provide a tool to guide our expectations.
So with that knowledge let’s look at what we can expect in
the third quarter of 2009. In the
previous article “fear and greed an update” we outlined that it is best to
maintain your strategy and wait for a better lower risk opportunity to reenter
the market. Will that time be the third
quarter? It looks good.
History of the markets tells us that Canadian markets
correct in the third quarter and the economic news reinforces and contributes
to the likely hood of that this year. With more repercussions from GM and Chrysler still to come and the
restructuring of the banks in the U.S. just barely started there are lots of
reasons for a correction after such a strong run up by stocks in the last 12
weeks.
Will the correction be deep? Our analysis says no, and as each day passes the likelyhood of a deep
correction decreases. Look for the TSX
to drop towards the 9000 level. At this
point it will represent an opportunity to buy good securities cheap while at a
low risk re-entry point. This is a
forecast, it’s not cast in stone, but here’s to hoping we don’t get rained on. |
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