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Calming and Sustainability

May 26, 2010 – 4:50 pm

A strong open this morning follows what in the trade we call a reversal day yesterday. With a strong fall of over 200 points in the Dow in the morning and then reversing to end the day at only down 20. That reversal continued this morning. This could spell the end of this correction but of course it is too early to gauge. Reversal days are more often than not a clue to a possible direction change.

There were two pieces of good economic news out this morning that helped. The first was a stronger than expected durable goods sales report for April up 2.9%, but if you remove airplanes it was down .6% while March’s number was revised up from a fall of .6% to flat. The second bit of news is the new home construction report. The expectation was for it to be up 425,000 and it came in at 504,000. Of course the worry is sustainability.

Europe is starting to fade, ever so slightly, as the main news lead. If that continues the market should begin to recover. It would also be very helpful if our Congress would finally pass whatever financial reform law they want. The market hates uncertainty and it has had a lot of that lately.

Good Trading
Steve Peasley

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