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Corrections

June 14, 2010 – 10:13 pm

The better outlook for the market is all about Europe, again! The fall or correction we have experienced was blamed on the fear that Europe was going to sink back into recession as the Greek debt ballooned. That debt bomb fear spread to other weak small countries on the continent. Starting last week with good news coming out of Germany and unexpected strength of exports from China the worry mongers started to scramble to find the bad news they had been flogging us with for weeks.

Today Europe looks better. The ECB raised growth expectations to 1% for this year, a little higher than was previously forecast. The dollar has fallen against the Euro for 5 days in a row, if today holds, and the dollar/euro relationship has been the dog wagging the stock market’s tail; stronger dollar, down market; weaker dollar, strong market.

For some time we have been selling the idea we are in a correction and that is still our opinion. Compared to the other corrections we have had since this bull market started in March of 2009 this one was deep at 14%. It appears the correction is in its completion phase. I wish that would mean a return to a strong bull market but more likely it is going to be a bounce that will struggle to exceed the recent highs in the indexes.

I would anticipate a better move up later in the year because summers are just so very problematic for stocks. Corrections and rallies are common as the hot days of summer put investors and traders off their game.

Good Trading
Steve Peasley

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