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Direction or Directionless?

July 28, 2010 – 5:15 pm

This morning the market started the day on the weak side. In pre-market activity more strong earnings were reported by corporations, but a report on June’s durable goods was weaker than expected.

Sales of durable goods fell 1% when it was expected to be up 1%. That is the second month in a row with weaker than expected numbers and is actually shrinking. However, orders for non defense items excluding volatile aircraft actually rose .6% after increasing 4.6% in May which is an indication that corporations are spending some of their cash they’ve been hording, but the overall trend is not strong. This is another indication of the soft spot in our economic recovery.

Many investors and traders are wondering where we go from here. Does the economy shake off the soft spot or are we going to fall into the infamous double dip recession? There seems to be a shift away from the double dip and towards an assumption by most economists that we are going to continue to grow but slowly. Economists are not investors or traders so it is the investor’s and trader’s opinions that matters to stock prices.

With more and more companies reporting we are seeing surprisingly strong earnings and the projections have been very good. This certainly gives the market a sound footing as stock prices are not expensive in comparison to historical norms.

The result may well be a choppy market until we see further signs of economic recovery or weakness.

Good Trading
Steve Peasley

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