Is this the start of a big downward correction?

Few traders are taking the recent stock-market dip seriously, says John C Burford. Things may be about to get interesting.

The sharp decline off last Friday's all-time Dow high at 16,650 stretched to about 450 points on Tuesday, hitting a low of 16,200. And that leaves me wondering if this is the start of a big downward correction.

Because I believe that market swings are generated not by the fundamentals (or news), but by the traders' emotional responses to factors, which include the news, it is essential to try to assess the reaction of traders to this latest decline.

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John is is a British-born lapsed PhD physicist, who previously worked for Nasa on the Mars exploration team. He is a former commodity trading advisor with the US Commodities Futures Trading Commission, and worked in a boutique futures house in California in the 1980s.

 

He was a partner in one of the first futures newsletter advisory services, based in Washington DC, specialising in pork bellies and currencies. John is primarily a chart-reading trader, having cut his trading teeth in the days before PCs.

 

As well as his work in the financial world, he has launched, run and sold several 'real' businesses producing 'real' products.