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Direction or Directionless

November 3, 2010 – 5:04 pm

Lost in the run up to the elections and the Federal Reserve two day meeting this week is the all important October jobs report that will be coming out on Friday. In past months everyone focused on that number looking for the elusive improvement in the employment picture. I suspect jobs are still hiding from potential workers. There may well be slight improvement but it is not going to be enough to affect the unemployment rate.

That may well weigh heavily on the market but most experts felt the elections, with a Republican sweep in the House and gaining seats in the Senate, may actually be negative for the stock market in the short term because everyone expected those results. When you expect something the reaction to it has already happened therefore when the actual event occurs it leads to the opposite reaction.

The economic numbers this week are showing incremental improvement but not enough to make any difference and the earnings season which is now behind us was very good, but as I said it’s behind us, so what is going to make the market move higher?

Stocks are poised to give back some of the gains but so far they have only given hints of weakness. Those hints are in the form of very small gains with little conviction. Something is going to happen but will that something push prices higher or bring them down? My crystal ball is not working very well so I can’t tell you. If I use history as a guide the market is going higher. It has done so every time after the midterm elections going back almost 70 years. It just does not have to go up in a straight line.
There are no straight lines when it comes to direction for stock prices.

Good Trading
Steve Peasley

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