A change, usually negative, of at least 10% in the markets.
Stocks, bonds, commodities and indexes can all be affected by a reverse movement to adjust for an overvaluation. While usually temporary in nature, corrections can cause an interruption in the upswing of the asset or market. Although a correction is typically short, as compared to a bear market or a full blown recession, it can be a forerunner or indicator to either long term scenarios.
Analysts will check various international market indexes to gauge whether a market is headed for a correction, as in one index’s performance may tip off indicators for a similar correction elsewhere.