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Earnings and the Market

June 30, 2010 – 5:03 pm

Yesterday the market spooked itself over fears of Europe and its new tightening policy. The fear is that they are starting to tighten too soon, before the economies around the world are on solid footing. Added to that was fear that China is slowing its already too strong recovery. They have been trying to slow themselves down so the fear is that they will slow too much.

It is obvious that fear is bubbling just below the surface of this market. It does not help that the economic statistics seem to be softening when they were already soft to begin with. The statistics are still pointing to a growing economy but that growth is very anemic.

Stock prices are low in comparison to earrings. Also, earnings season starts next week and the numbers should be very good as there has been little to no warnings by companies that they are not going to make their numbers. Just as important as the actual earnings is the future outlook that the companies will hint at when they report the previous quarter’s profits. Make no mistake the profits are going to be very good, but the stock market looks forward and that is where the fear is coming from. Investors and traders are not convinced that we will not fall into a double dip recession and yesterday that fear spiked. Earnings go down in recessions; there’s the rub.

Good Trading
Steve Peasley

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