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An Unpleasant Waiting Game

July 20, 2012 – 5:09 pm

All three major economic reports out yesterday missed their expected number. LEI (Leading Economic Indicator) fell to -.3% with expectations for it to fall -,2%, a small miss. However,existing home sales came in at 437 million with expectations of 465 million a fall of 5.4% and the Philly Fed report came in at -12.9 when it was expected to be -6.8.

In and of themselves none of these numbers are a great surprise and they did pull the market down from a rally in the morning, but investors, economists and anyone who pays attention knows that the economy is soft and confusion on the future direction is very evident.

Why the market does not react more negatively is mostly due to the assumption that the Fed will ride to the rescue with QE3.

Of course how much weakness is needed before that happens is a guess and if the numbers come in too weak stock prices could easily tumble beginning to assume the Fed’s eventual ride to the rescue might be too little and too late.

The same is true for the fiscal cliff that is approaching; will any agreement come and will it also be too little to late?

It feels like a game of chicken played by the Fed, the President and Congress with the rest of the country waiting to see who flinches first. Not a good way to govern.

Good Trading
Steve Peasley

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