This is a run-of-the-mill correction, Paradigm Capital says

Stocks slipping a bit? Don’t worry about it says Paradigm Capital analyst Aazan Habib.

After last week’s losing streak, the Dow Jones was down again on April 15 on fears of a conflict between Israel and Iran.

But Habib says a correction is probably overdue and could signal the next leg of the bull market.

“We would embrace a tactical correction to position for continuation of the bull market,” the analyst said in a research report to clients April 14.

“Short-term breadth conditions are deteriorating with the NYSE McClellan Summation Index confirming a shift to a more difficult environment,” Habib continued. “However, so far, the character of this pullback remains that of a normal retracement within an uptrend. Overall realized volatility conditions are still low despite the uptick in the VIX, which is not consistent with significant tops. Some of Friday’s sharp sell-off can likely be attributed to market participants derisking positions and moving into cash ahead of the weekend.

The analyst talked about key levels he is looking at right now.

“We would embrace a tactical corrective phase to reset sentiment and set the stage for the next leg up. Our key stop loss zone on the S&P 500 remains 5100 – a break below this level would be a signal to brace for a deeper correction that could put 4950 as a downside target. For the TSX Composite, a pullback above 20,500 support should prove to be a buying opportunity. Despite the deteriorating short-term breadth in the US market, the TSX Venture is standing out as the ratio of new 52-week highs/lows hits the best reading in over 2 years.”