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Action and Reaction

October 25, 2010 – 4:56 pm

Over the weekend the G-20 meeting, which is the confab of financial officials from the 20 largest economies, vowed to stop or at least slow the currency war. While that is nice and a great goal there were no concrete steps, outline of proposals or official announcements to stop the war. It is all talk with no action. We will see if that changes.

Out this morning was the existing home sales report for September which jumped a very strong 10%. Inventory fell to 10 months but not only is the inventory still high, the average price fell 2.4%. Also, this number does not include the recent foreclosure mess. On the other hand this was the first number we have seen that did not have anything to do with any government interference so maybe we are seeing actual market forces at work.

It is impossible to figure out the home sales mess because of the foreclosure issue. We have either government interference with home sales and/or the banks freezing and then unfreezing foreclosures. Yet to come will be the result of lawsuits by state attorney generals and maybe the Federal government getting into the act. So how are we going to figure this out?

It is more fruitful to focus on earnings. About 80% of all reported earnings this season so far have beaten their estimates. That is a great underpinning for the market to move higher. Then there is the election coming up. Everyone is assuming a correction after that. Maybe, maybe not.

Good Trading
Steve Peasley

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