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Fear Versus the Facts

May 7, 2010 – 5:03 pm

There is no arguing that the market is in a fear driven correction that is violent to the down side. Yesterday you had computer driven panic and trading errors that added to the fear that was already in the market. This morning we have some more fear and the culprit is still Europe as its markets fell sharply again.

On the other hand, this morning it was reported we produced 290,000 jobs last month, a lot more than expected, and the jobs were revised up strongly for the two previous months. Our economic news is only improving.

What conclusions can we draw? First, we were already due for a correction in our market and though I would not have preferred or expected it to be this sharp and quick the correction is here and will set up a very good buying opportunity. Second, will the European problem spread to the Untied States? I doubt it. Our banks have very little sovereign debt in Europe so they will not be affected. Our U.S. based consumers actually will have more buying power as the dollar strengthens and our interest rates fall because of the European problems.

We are at a 7 to 10% correction as of this morning. How deep it will go is impossible to tell but we are now more than half way and we are at the limit of previous corrections.

As hard as it is, this is the time to start buying. The correction could go deeper so be very deliberate in your buying. Hopefully you produced cash before this week and it’s ready to deploy. Don’t let Fear control your decisions.

Good Trading
Steve Peasley

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