Watch Out for a Pull Back

I've been watching several indicators recently and I believe that the latest rally that began in June 2012 has now ended. We should start to take profit from the equity markets. Stock markets are very interesting. In the rally that began from March 2009 until now, not every market moves in tandem. The mining sector bull run ended in around Aug 2011, briefly broke into a bull run again for 3 months in 2012 before ending in Mar 2012. The Hang Seng China Enterprise bull rally ended in Aug 2011, around the same time as the mining sector. Notice how highly correlated the Chinese market and mining sector is. The European equity index moved in lock step with China and Mining, but not because of the slowdown of the Chinese economy, but the implosion of the Eurozone.

The US, and Southeast Asian indices like Singapore, Indonesia, Thailand and Malaysia have been in a bull rally without a break since March 2009. 

The precious metal sector like gold and silver have been moving in its own world. It reached the peak in Sep 2011 before collapsing by 20 - 30%. It recently made a rebound back into the bull region. The precious metal sector looks strong and any pull back is a good entry point.

For equity markets in general, I expect a pull back, especially for the markets that have rallied since Mar 2009 without breaks. For China and mining, they are still in a bear zone trying to break up but I believe consolidation will take a while. For Europe, I believe they have already broken above their bear trends and may surprise investors with their performance.

Now I will always go for the cheapest markets and in my books China and Europe are the cheapest markets. I think a pull back will occur for now, so I've taken some profit off the table but will dollar cost slowly in when the dips occur. For the mining sector, I believe it is also time to take profit. But I will look to dollar cost slowly.

There is no rush to get into the stock markets now, unless you want to buy gold or silver. A correction of the S&P500 by 5 - 10% is possible for the next 1 - 3 months. Hang on tight.