[quote=davelj][quote=Arraya]It’s all driven by emotional/irrational behavior which by human nature herds. This next down trend, if it indeed has started, should go throughout 2010 and overcorrect to the downside.[/quote]

“Should” being the operative word. Lots of things that “should” happen in financial markets don’t.

As Grantham has pointed out, the only certainty in all of finance is mean reversion – eventually. The degree to which assets should or shouldn’t over-correct is pure speculation.[/quote]

No doubt, mean reversion is the only certainty. How fast it gets there and how far it overcorrects is another story. Should just indicates the most probabilistic outcome. Mean is another constantly moving target and to make things more complicated, fundamentals are on the subjective side.

The correction phase, however, *will* happen eventually.

he.. It *should* have started in the fall according to me.

IMO, the correction phase is inevitable and people will look for news to justify it, when in reality has little to nothing to do with it except maybe of the turning point but not the actual correction.

Economic fundamentals have been deteriorating and a stock correction will exacerbate the deterioration.