The Bull Run may continue for quite some time but has become more vulnerable to a correction.

Time and time again, some investors have been forced to sell on the cheap when they read reports that there would be tightening in lending, plans to withdraw stimulus measures as well as valuations being overstretched.

Time and time again, some of them sell during a correction only to be caught flat-footed when a rebound occurs almost immediately.  For example, they bought into a stock at $1, rode the bull market to $1.20 and sold at $1.10 when there was a correction.  The share price immediately shot up to $1.15 before they even knew what happened and missed the next wave to $1.30.  While some of them would have given up on this stock, there are others who jump back in at $1.30 only to sell it at $1.20 during the next correction.

They are scared, so they sell.  This is human nature and there is nothing we can do about it unless we can stand firm and not sell if we are able to identify that we are in the midst of a Bull Run, so selling out for a small profit is never an option.

Yes, the Bull Run is still very much alive but has stalled after a spectacular rally from March.

Much of the easy money has been made and the investors are now treading in treacherous territory where the chances of a correction are high, especially when most people are sure that growth in 2010 will be sluggish.

Even US Federal Reserve Chairman Ben Bernanke has admitted that 2010 will not be a wonderful year.  This has made investors sit up and rethink their strategy with some choosing to take profit or continue staying on the sideline until the clouds clear.

With several uncertainties still looming, it is no wonder that investors refuse to chase the rally preferring to sell every time the rally reaches a fresh recent high.  However, they have to remember that they are still in a Bull Run that may continue for quite some time but has become more vulnerable to a correction - in particular a correction that has to be as deep as 10% - when economic fundamentals in the first quarter of 2010 cannot support the rally.

Share Investment
Issue 372
14/12/09 - 27/12/09
www.sharesinv.com

Read:

BELIEVING A BULL MARKET

and also:

THRIVING IN EVERY MARKET
Value Investing Made Easy (Janet Lowe):

1. THRIVING IN EVERY MARKET
2. MR. MARKET
3. SUITABLE SECURITIES AT SUITABLE PRICES
4. PAYING RESPECT TO THE MARKET
5. TIMING VERSUS PRICING
6. BELIEVING A BULL MARKET
7. THE PAUSE AT THE TOP OF THE ROLLER COASTER
8. MAKING FRIENDS WITH A BEAR
9. BARGAINS AT THE BOTTOM
10. SIGNS AT THE BOTTOM
11. BUYING TIME
12. IF YOU ABSOLUTELY MUST PLAY THE HORSES