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Earnings! Earnings! Earnings!

October 12, 2009 – 9:50 am

The most recent gains in the stock market can partially be traced to a weaker U.S. dollar. It appears that we are running out of the dollar being a catalyst for higher stock prices. The dollar is low and justifiably so, with the massive government spending programs and the very low interest rates, but how much lower will it go is the more important question. I think it is reaching a point where it will stop falling.

In that case investors and traders will turn to something else to keep stock prices moving higher and that will likely be earnings. Over the next couple weeks we will have earnings reports from a majority of the S&P 500 companies and that is going to give us some direction.

The market itself is currently overpriced but that is normal in a recovering economy. Earnings will start to catch up if we move out of the current recession. It appears that is exactly what we are doing so do not expect the stock market to collapse. There will be corrections but so far they have been very mild and not one has reached the normal correction level of 10%. Someday that will change and it could be sooner than later, but stay with the market for the present.

Further gains will depend on earnings. It always does.

Good Trading
Steve Peasley

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