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Hints and Suggestions

August 13, 2012 – 5:11 pm

Strong exports and weak imports last month shrank our trade deficit by 10% or more. Much of the weaker imports was due to oil prices falling, but also we increased our exports to China. Add this to the only other major economic statistic this week which was the second quarter productivity number which was much better than expected and we are going to see a higher GDP growth number than expected.

This does not translate into more jobs nor does it suggest our economy is growing much faster than the slow pace we are currently on. What it does suggest is that possibly the slowdown we have seen develop in recent weeks and months may be only just that, a slowdown and not a path to a new recession.

The stock market so far seems to confirm this outcome. Over the last number of weeks the market has slowly marched upward in the face of poor economic numbers. As the stock market is one of the most reliable economic indicators it would be foolish to ignore its recent behavior.

However, it is a delicate balance and it is the summer. A stock market correction is likely, but evidence suggests it will be only a correction if it comes, not a return to a bear market.

Good Trading
Steve Peasley

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