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European Solution Where, When and How?

October 26, 2011 – 5:10 pm

There is no getting away from what is going on in Europe. This morning there is a big meeting between leaders of the EU and the stock market is thrashing about wondering what to expect.

Meanwhile this morning new home sales came in better than expected for September, up 4.3% from August while prices fell about 4% and inventory shrank to 6.2 months. The housing sector is struggling to find a bottom. A hint that we might be there came with the Case/Shiller report out earlier in the week showing prices in the largest 20 cities across American rising for the 5th month in a row. But that report was for August not September. The housing market is not improving which is something everyone can agree on.

In the short term it is going to be about Europe. This week will have ‘some’ clarity though I doubt it will clear once the leaders end their meeting this morning. They are debating on what additional steps will be taken i.e. stronger steps to bolster their banks, what additional haircut the Greek bond holders (meaning banks) will need or are willing to take, and what further austerity measures are needed. It is a big plate of actions being contemplated all moving at the same time.

There will ‘not’ be a final resolution. Some things will be done immediately and many others will be pushed into the future. This problem in Europe, much like our housing mess, will take years to sort out.

It is the amount of pain that the stock market is trying to measure. It is looking forward and despite the mid-week weakness it sees some improvement. Still the market has not yet made up its mind about the future.

Good Trading
Steve Peasley

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