Whenever the market is going through a pullback, I am often asked the reasons behind the selloff. Other commentators attribute such action to the Fed raising rates, bad earnings reports, or even weather events like hurricanes.
Typically, though, the market usually pulls back for one simple reason: It’s just spent a lot of time going up! You see, markets go through regular cycles where buyers get increasingly excited, and bid up prices, until everyone who wants to buy has already done so. At that point, sellers come in, take over, and move prices back down.
It’s for that very reason that after long runs like we’ve seen on the NASDAQ, a 2 or 3% pullback isn’t anything to worry about. It’s just a normal, organic part of how the market works.
[See Gary's chart in the box to the right.]
This weekend our Business Block has much more with "The Chartman". Tune in Saturday 10am - noon ET.
Gary B. Smith, "The Chartman," is a contributing editor for RealMoney.com and a regular commentator on "Bulls & Bears."
Gary B. Smith joined FOX News Channel in 1999 and is currently a regular commentator on "Bulls & Bears," including his own segment called, "The Chartman."