Pullback or Crash? Check Out the Chile ETF and Copper ETN

So you’re worried that the stock market’s about to cave in. You don’t know if you should sell now or wait to see what happens. You don’t know if it’s worth changing anything, since the market may merely pull back 5%-8% like it did in June/July.

The answer on when and what to sell should come from your sell discipline. If you have stop-losses on an ETF or individual security… you let the unemotional sell decision take care of itself.

The decision on when and what to buy should come from a buy list that you’re developing right this second. What would you buy today if only it were 10% cheaper? What do the trends tell you about the likely course of events over the next 6-9 months?

Anecdotal info… money managers everywhere are putting money back to work on behalf of their clients. The need to buy the dips and finish 2009 on a higher note is an extremely powerful tailwind. Psychologically speaking, there’s plenty of greed left in the tank for worldwide investors who use the weak U.S. dollar to borrow and invest.

Still not convinced you should buy the dips of any correction? Consider the copper effect.

If stock assets were about to crash on a looming economic disaster, or sink into another life-altering bear market, you would expect one of the world’s most used metals, copper, to falter. And for a while there in September, the popular metal was struggling relative to other metals.

More recently, however, you can see that copper has once again been hitting new highs in 2009. With copper hitting new closing highs and intra-day highs as recently as last week, we would be hard pressed to say the global asset rally is toast; rather, a pullback after 8 months of “up-up-up” is a desirable development.

An emerging market that depends heavily on worldwide interest in copper is Chile. It follows that extreme weakness in the iShares Chile ETF (ECH) would give one a more valid reason to worry. But alas, iShares Chile (ECH) has also been hitting new highs.

Full Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company may hold positions in the ETFs, mutual funds and/or index funds mentioned above.